Monday, January 31, 2011

Westport Innovations Inc. (NASDAQ: WPRT) Q1 2011 Analysis

Recent price: 15.77$
P/E Ratio: -
3 month Target Price: 19.50$

Company Description
As it can be seen on their website, Westport Innovations is a global leader in alternative fuel, low-emissions transportation technologies. Leveraging a capital efficient business model to develop and commercialize natural gas engines in key vertical markets, Westport has grown substantially in revenue and stature. Helping drive the underlying value for Westport is a set of unique characteristics including:
strong market fundamentals including environmental benefits and savings in fuel cost between diesel and natural gas driving growth of natural gas engines; 
valuable strategic and business alliances with some of the world's largest engine and vehicle manufacturers creating significant barriers to entry; 
a highly capital efficient business model leveraging the manufacturing capabilities of our strategic partners; 
a deep and rich intellectual property base establishing a leadership position and licensing capabilities; and 
a solid and experienced senior management team.

Confidence Margins
Strong resistance $21.34 (+35%)
Light resistance 19.77 (+25%)
Light support $14.94 (-5%)
Strong support $13.39 (-15%)

From a fundamental perspective, this company is pretty overvalued. It is part of the wave of clean energy companies that have been sweeping the market over the past decade. It is interesting to note that the technicals point to an uptrend in the coming months and that there is some serious upside potential for this company.

Entry strategy
For the cautious investor:
Buy the stock for 16$ or less.

For the risk-taking trader:
The April 2011 17.50$ call option contract seems to be the right position to take, they can be acquired for 80$ per contract.

Exit Strategy
For the cautious investor:
Sell when the stock reaches 19.50$, or keep it until 21$ if the stock crosses the light resistance level.

For the risk-taking trader:
The contracts should be kept until the underlying reaches around 19.50$, as for the cautious investor.

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