Sunday, October 31, 2010

99 Cents Only Stores (NDN) Q4 2010 Analysis

Recent price: 16.34$
P/E Ratio: 16.84
3 month Target Price: 17.75$

Company Description
99¢ Only Stores is a unique deep-discount retailer of primarily name-brand consumable general merchandise. We have always delivered great value to our customers, and in these challenging economic times, we are "The Right Store...Now More Than Ever!" They provide a primary shopping destination for price-sensitive consumers and a fun treasure-hunt shopping experience for other value conscious consumers. They accomplish this by offering excellent values on a wide selection of quality food and basic household items with a focus on name brands and an exciting assortment of “wow” items.

Their stores are attractively merchandised, clean, full service "destination" locations that offer customers significant value on their everyday household needs in a fun shopping environment. Merchandise encompasses a wide array of name brand closeouts and regularly available consumable products including food and beverages such as produce, deli, and other basic grocery items.

Confidence Margins
Strong resistance $19.07 (+17%)
Light resistance $17.75 (+9%)
Light support $15.75 (-4%)
Strong support $15.10 (-8%)

The NDN stock has recently suffered a large selloff due to a lowering of their revenue guidance. This will be a great opportunity for the coming quarter.

Entry and Exit Strategy
For the cautious investor:
Buy the stock for 16.25$/share or less.

For the risk-taking trader:
Buy 22.50$ March 2011 out of the money call options for about 20$/contract or less. The stock is trading inside a channel defined buy the light resistance and the light support. Selling when the stock is at the higher end of the channel will be cautious and profitable.

For the cautious investor:
Sell when the stock reaches 17.75$, because of the light resistance or keep it until about 19$ if you are very bullish.

For the risk-taking trader:
The announcement of quarterly results should trigger an interesting price movement since the market anticipates them to be bad. A good thing to do would be to hold the contracts until the stock reaches the light resistance

No comments:

Post a Comment