It's not exactly a household name for many, but B. Riley Financial (NASDAQ:RILY) made some downright exciting gains recently on the strength of one big exchange move. B. Riley gained over 14% at one point in trading, and though there's been some fluctuation in value since—especially in premarket trading overnight—it's actually maintaining those gains fairly well.
One Big Jump Drove Plenty of Gains
The biggest news that served as the catalyst for B. Riley's new gains was the announcement that, as of Thursday, it would be found on the S&P SmallCap 600 listings. It's poised to take over the place of The Michaels Companies (NASDAQ:MIK), which owns and operates the Michaels stores, the largest chain craft stores in the US, at last report. The Michaels Companies are set to be acquired by Apollo Global Management (NYSE:APO), in a deal that most expect to conclude successfully this month.
For B. Riley, meanwhile, the move will feature something of a division in share issues. The company announced that those who held shares in its Principal 150 Merger Corp would be allowed to trade, separately, shares of Class A common stock. The common stock and warrants that would be established as a result of the new trading would be found under new ticker symbols.
That's a fairly substantial step by itself, but it dovetails nicely with earlier reports out of the company. Just a few weeks ago, B. Riley brought out guidance for its first-quarter earnings results, noting that it's expecting gains over the first quarter of 2020. The company is expecting adjusted earnings to come out between $105 million and $115 million, which is well beyond the adjusted earnings for the first quarter of 2020. Those came in at $70.9 million.
The gains B. Riley has seen so far are largely owed to pandemic-related activity; B. Riley's primary focus is on capital markets and investment banking, both of which exploded in 2020 due to a host of factors, from places moving their headquarters locations to more telecommuter-friendly environments to people trading stocks with stimulus checks. While these factors are likely to have a lot less impact on 2021—and in turn may hurt B. Riley's second quarter figures and beyond—it will bear watching as to just how well B. Riley can adjust to a completely new set of conditions.
An Uncertain Analyst Picture
Turning to the broader analyst pool, however, gives us surprisingly little to work with. Though B. Riley has frequently emerged as a source of information about various stocks—it's offered recent perspective on stocks ranging from Express (NYSE:EXPR) to AMC Entertainment (NYSE:AMC)—there's a surprising dearth of opinion about the company itself from other analysts.
An Attention Bonanza?
While it's downright distressing that there's so little analyst perspective targeting B. Riley, this recent exchange move should be just what it needs to draw more attention its way. A lot more attention, in fact; there are several exchange-traded funds (ETFs) that focus on the S&P SmallCap 600. With ETFs getting involved, that's going to draw a lot more attention B. Riley's way, a point in which it was sorely in need.
Moreover, it's also likely to draw quite a bit of capital investment. Remember what happened to Tesla (NASDAQ:TSLA) stock when it joined the S&P 500. While the impact of joining the S&P SmallCap 600 won't be near so profound, it should have at least some impact on the company's fortunes, and we've already seen that happen to a certain degree.
Thus, we're looking at a company that's getting plenty of tailwinds behind it, but also, one that's proceeding into a set of market conditions that might not be optimal. B. Riley shares have been trending upward, particularly so since roughly November 2020. The company's share price, so far, is up around 257% on the year, and it's done quite well with outside ratings.
Essentially, this is going to be a good stock to watch. For those willing to buy in, you have plenty of motivation to do so, but be sure to watch for unexpected downturns. The next few weeks are likely to be excellent for B. Riley thanks to the sheer range of the tailwinds supporting it, but with macroeconomic conditions likely to turn against it, you may want to be prepared to retreat quickly. However, if B. Riley can make some adjustments to its product/service lines accordingly, it may be able to weather the storm that's likely to hit it within the next few months.
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