Why is the Dusk (ASX:DSK) share price firing 15% higher today?

Dusk snaps back off a 3-month low and gains support on Friday.

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A flaming orange arrow against a black background demonstrates the rising Pilbara Minerals share price today

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Key points

  • Dusk shares are bouncing off a 3-month low today.
  • Shares are soaring 15% into the green at the time of writing after a sharp snapback
  • The company released its latest trading update on Monday
  • Dusk is rated as a buy from 4 brokers covering the stock

The Dusk Group Ltd (ASX: DSK) share price is soaring 14.83% into the green today despite no market-sensitive information from the company.

At the time of writing, shares in the fragrance retailer are changing hands at $2.71 apiece.

Why’s the Dusk share price charging higher?

In the absence of any price-sensitive information, it’s not abundantly clear what’s underneath the Dusk share price today which is keeping it afloat. But it hasn’t been quiet in Dusk’s corner lately, that’s for sure.

For example, Dusk shares did bounce off a 3-month low today. However, the trend was downwards following the release of its latest trading update on Monday.

In it, the company recognised a number of headwinds that had a material impact on both sales and earnings. For instance, sales fell 12% year over year to $80 million, whereas it lost a total of 5,483 trading days this year due to mandated lockdowns from COVID-19.

Aside from that, the company made the acquisition of Eroma Group on a valuation of $28 million. Dusk sees value arising from the transaction and reckons it will realise a 20% accretion at the earnings per share (EPS) level. The transaction is due for settlement today.

It also managed to open another 6 stores in its network, now claiming a total of 128 stores in its network despite the headwinds from COVID-19.

Plus with lockdowns, Dusk recognised a 4% gain in online sales year over year – which now makes up nearly 10% of total sales.

Investors weren’t impressed by the candle specialist’s numbers on the day, sending its share price well into the red and maintaining the pressure until the close on Thursday.

However, shares are trading back near 52-week lows as well, and the sharp pullback appears to have piqued investors interests, perhaps given the mixed earnings result.

Not to mention the company received a new bullish update from Shaw & Partners, who raised its price target on the stock by approximately 6% to $3.70 per share.

The firm joins Barrenjoey Capital Markets, Canaccord Genuity and Barclay Pearce Capital in recommending Dusk as a buy, with a consensus price target of $4.08 per share.

Keep in mind that both Shaw and Barrenjoey released their revised valuation updates post Dusk’s trading update, which also could have been picked up by the market today.

Either way, should Dusk converge to the consensus price target, this offers around 55% upside potential at the time of writing.

Dusk share price summary

In the last month, the Dusk share price has held onto gains and is now 15% in the green during that time.

Thing’s aren’t so rosy this year to date however, as shares have collapsed 15% since January 1.

Hence today’s gains are a welcomed liftoff from the selling pressure that’s been in situ since we rolled into 2022.

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Motley Fool contributor Zach Bristow has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Dusk Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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