Thursday, December 23, 2010

Itron Inc. (NASDAQ: ITRI) Q1 2011 Analysis

Recent price: 54.73$
P/E Ratio: 25.45
3 month Target Price: 62$

Company Description
Itron Inc. is a leading technology provider to the global energy and water industries. The company is the world’s leading provider of intelligent metering, data collection and utility software solutions, with nearly 8,000 utilities worldwide relying on their technology to optimize the delivery and use of energy and water. Their products include electricity, gas, water and heat meters, data collection and communication systems, including automated meter reading (AMR) and advanced metering infrastructure (AMI); meter data management and related software applications; as well as project management, installation, and consulting services.

Confidence Margins
Strong resistance $67.58 (+23%)
Light resistance $63.70 (+16%)
Light support $52.12 (-5%)
Strong support $47.10 (-14%)

The recent price drop of the company's stock is due to a recent recommendations by Goldman Sachs analyst Mark Wienkes. His rationale is that ITRI will see a slump in sales in the coming years, but in the meantime, it remains a bargain at current prices and should see some interesting upside in the coming months due to it's oversold status. This is an interesting position for the coming months and calls for a bullish position.

Entry strategy
For the cautious investor:
Buy the stock for 55$ or less.

For the risk-taking trader:
The best thing to do here is to purchase the February 2011 65$ call option contracts. They should yield the highest return as the stock gets closer to it's target price.

Exit Strategy
For the cautious investor:
Sell when the stock reaches 63$, or keep it until 67$ if you are very bullish.

For the risk-taking trader:
Since the options price depend greatly on the price of the underlying security, the time to sell is the same as for the cautious investor. The investor must keep a look for any drop in the stock price that would cross a support line as it will have a disproportionate affect the option prices.