Bad news in the price? Buy the earnings break.
SUFFERING LIKE ALL US RETAILERS
Signet is a US mid cap with a leading position in mid-market jewelry retail. It has most recently been impacted negatively by the dull holiday season, and has generally paid the price of the weak US retail environment.
EVERYTHING HAS A PRICE?
The shares have been suffering, and are consequently trading at inexpensive multiples (discount to market and to its own long term valuation). Furthermore, management has been reshuffling the business and lowering expectations for next quarters. Fundamentally, the company continues to have an interesting growth profile on both the top and bottom line. The consensus of analysts has a BUY recommendation with a 41% target upside.
TECHNICALLY BOTTOMING OUT?
With quite high short interest (12.4% of free float, or >8 days of trading), any marginal good news could take the shares significantly higher. Furthermore, while the mid/long term technical picture still looks quite weak, it seems the stock has been trying to bottom out on the daily chart.
WHAT TO DO WITH THE SHARES?
Up levels: 77.18 / 80.00 / 84.25 / 84.75 / 86.00 /87.20
Down levels: 70.00 / 67.50
Target: 87.20 (+16.71%)
Stop-loss 1: 70.00 (-6.3%)
Stop-loss 2: 67.50 (-9.65%)
Reward-Risk: 2.65x
Strategy: Buy the shares IN HALF SIZE ahead of the earnings release on March 9.
Signet is a US mid cap with a leading position in mid-market jewelry retail. It has most recently been impacted negatively by the dull holiday season, and has generally paid the price of the weak US retail environment.
EVERYTHING HAS A PRICE?
The shares have been suffering, and are consequently trading at inexpensive multiples (discount to market and to its own long term valuation). Furthermore, management has been reshuffling the business and lowering expectations for next quarters. Fundamentally, the company continues to have an interesting growth profile on both the top and bottom line. The consensus of analysts has a BUY recommendation with a 41% target upside.
TECHNICALLY BOTTOMING OUT?
With quite high short interest (12.4% of free float, or >8 days of trading), any marginal good news could take the shares significantly higher. Furthermore, while the mid/long term technical picture still looks quite weak, it seems the stock has been trying to bottom out on the daily chart.
WHAT TO DO WITH THE SHARES?
Up levels: 77.18 / 80.00 / 84.25 / 84.75 / 86.00 /87.20
Down levels: 70.00 / 67.50
Target: 87.20 (+16.71%)
Stop-loss 1: 70.00 (-6.3%)
Stop-loss 2: 67.50 (-9.65%)
Reward-Risk: 2.65x
Strategy: Buy the shares IN HALF SIZE ahead of the earnings release on March 9.
Comment:
The stock lost nearly $650m in market capitalization on the basis of a press article unveiling presumed sexual harassment practices in some subsidiaries of the company. This drama seems oversold, and the rebound in the shares on the following day attests to that. We should get more clarity during the upcoming earnings release.
Trade closed: stop reached:
Continue to believe that the down move of the stock is overdone. However, good earnings only managed to take the shares back up marginally, in the context of a class action which promises to be extended, in an otherwise weak retail environment, and ahead of a potential market correction. Take losses and move on.