Sell This Retailer

I am writing today to recommend selling Party City (PRTY). While I do not like taking a loss and feel there is potential for the shares to rise more, the risk-versus-reward characteristics have become less favorable in front of critical Halloween sales in light of the stock’s recent rally.

While I believe the market’s concerns over the company’s high inventory and debt levels are overstated, they could lead to a sharp decline in the stock from current levels if Halloween sales even slightly disappoint. I still believe the shares are cheap and might revisit them at some point, but I would like to have a little more clarity in the transitional issues the company is having now before recommending the stock again. Sell PRTY.