Position Close Update: CommVault Systems, Inc. (CVLT)

David Trainer  |

CommVault Systems (CVLT) – Closing Short Position – down 17% vs. S&P up 15%

CommVault Systems (CVLT) was originally selected as a Danger Zone Idea on 9/25/17. At the time of the initial report, the stock received a Very Unattractive rating. Our short thesis noted the firm’s lack of profitability, subpar corporate governance, and overvalued stock price.

During the 592-day holding period, CVLT outperformed as a short position, declining 17% compared to a 15% gain for the S&P 500.

We upgraded CVLT’s Overall Risk/Reward Rating to Unattractive in October 2017 and, then, to Neutral, on 5/3/19. The stock remains overvalued, but its risk/reward profile shifted. CommVault recently appointed a new CEO and board members after facing pressure from activist investor Elliott Management. The company has also improved its once negative return on invested capital (ROIC) to a top-quintile 20%.

Given the management change, along with improved profitability in 2019, we believe it is time to take the gains in this stock as it trades near its 52-week low. As a result, we are closing this position

Figure 1: CVLT vs. S&P 500 – Price Return – Successful Short Call

Image Source: New Constructs, LLC

Sources: New Constructs, LLC and company filings

Note: Gain/Decline performance analysis excludes transaction costs and dividends.

This article originally published on May 13, 2019.

Disclosure: David Trainer, Kyle Guske II, and Sam McBride receive no compensation to write about any specific stock, style, or theme.

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DISCLOSURE: Disclosure: David Trainer, Kyle Guske II, and Sam McBride receive no compensation to write about any specific stock, style, or theme.


The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

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