Q: Are you surprised of the performance of the stock since announcing they were no longer pursuing the takeover of Seven & I? There was a sharp uptick in the stock on the first day, but since drafted back to the $70 range again. Is this a continued buying opportunity?
5i Research Answer:
ATD’s share price has gone back to where it was trading before the news that the company will pull back from the deal to acquire the parent company of 7-Eleven. We think the continued weakness in ATD’s share price offers investors an attractive entry point into the name, given that the investment thesis in ATD as a long-term industry consolidator remains largely unchanged. We feel ATD is a low-risk type of compounder that could do well over the long term, and we would be comfortable adding here. That being said, defensive names have not done well recently, investors may continue to see ATD’s share price underperform for some time before an eventual recovery happens.