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Revlon (REV) Stock Gained 250% Amid Bankruptcy Crisis

It’s been an incredible month for shareholders of the beauty giant Revlon (NYSE:ROUND). As of June 10, investors could have bought REV shares for around $4 a piece. On June 13 (the following Monday), Revlon shares fell to nearly $1 per share. From this level, we have seen an incredible rally, with investors now valuing this stock at over $7 per share today.

So what gives? After all, this whole ordeal started when Revlon announced that the company was filing for bankruptcy.

Well, as a comrade InvestorPlace Financial news writer Samuel O’Brient pointed out in a recent article that takeover rumors have been circulating, with some suggesting Revlon could be a nice complementary acquisition for a larger beauty-related company. Another one InvestorPlace Joel Baglole’s report suggests that REV stock has also become one of the best short-term candidates for retail investors.

So there are currently two real catalysts driving Revlon stock. Both have nothing to do with the company’s fundamentals, which are clearly impaired. However, these catalysts had the effect of driving REV stock from $4 to $1 and then rising 600% from the bottom.

Now let’s see where investors should go.

Is REV stock worth buying on these catalysts?

I don’t think investors should touch Revlon at these levels.

Of course, this stock could continue to rally from here. Momentum does its job, and anything is possible. Indeed, we have seen what has happened with the pressures in the past.

However, when there are ultimately no fundamentals to support a move like this, the downside of such a trade is often as violent as the upside. It could get messy. Quick.

Other high-profile bankruptcy situations have certainly provided business opportunities, as has Revlon. That said, the story speaks for itself in these cases. This stock is simply way too risky for my liking and for those with more conservative risk profiles. Accordingly, I am of the opinion that Revlon is a stock to avoid at this time.

As of the date of publication, Chris MacDonald had (neither directly nor indirectly) any position in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to publishing guidelines.

Chris MacDonald’s love of investing has led him to pursue an MBA in finance and take on a number of management roles in corporate finance and venture capital over the past 15 years. His experience as a financial analyst in the past, coupled with his fervor for finding undervalued growth opportunities, contribute to his conservative and long-term investment outlook.


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