Monday, January 24, 2011

Constellation Brands, Inc (NYSE: STZ) Q1 2011 Analysis

Recent price: 19.14$
P/E Ratio: 20.19
3 month Target Price: 21$

Company Description
According to their investor relations website, Constellation Brands, Inc. (NYSE: STZ and STZ.B) is the world's leading premium wine company that achieves success through an unmatched knowledge of wine consumers, storied brands that suit varied lives and tastes, and talented employees worldwide. With a broad portfolio of widely admired premium products across the wine, beer and spirits categories, Constellation's brand portfolio includes Robert Mondavi, Hardys, Clos du Bois, Blackstone, Arbor Mist, Estancia, Ravenswood, Jackson-Triggs, Kim Crawford, Corona Extra, Black Velvet Canadian Whisky and SVEDKA Vodka. Headquartered in Victor, New York, Constellation is an S&P 500 Index and Fortune 1000® company with more than 100 brands in their portfolio, sales in about 150 countries and operations at more than 40 facilities. The company believes that industry leadership involves a commitment to their brands, to the trade, to the land, to investors and to different people around the world who turn to our products when celebrating big moments or enjoying quiet ones.

Confidence Margins
Strong resistance $22.52 (+31%)
Light resistance 21.00 (+10%)
Light support $18.85 (-1%)
Strong support $17.35 (-9%)

The recent Q3 fiscal report of the company generated a buying opportunity for a cash flow rich company. In it's recent filing, it seems the company had lower sales than analysts expected. In our opinion, this doesn't account for a 14% drop of the stock over the last month. There is only little downside left (the company is planning to sell some non core assets), so one could take advantage of the current situation on expose oneself's portfolio to this wine maker.

Entry strategy
For the cautious investor:
Buy the stock for 19.50$ or less.

For the risk-taking trader:
The April 2011 20$ call option contract seems to be the right position to take, they can be acquired for about 60$ per contract.

Exit Strategy
For the cautious investor:
Sell when the stock reaches 21$, or keep it until 22$ if the stock crosses the light resistance level.

For the risk-taking trader:
The contracts should be kept until the underlying reaches around 21$, as for the cautious investor. There is a lot of potential upside in this stock, but one has to keep an eye is the stock goes under current levels.

No comments:

Post a Comment