Tuesday, February 22, 2011

China Mobile Ltd (NYSE: CHL) Q1 2011 Price Target

Recent price: 47.66$
P/E Ratio: 10.86
3 Months Target Price: 51$

Company Description
According to Reuters, China Mobile Limited, incorporated on September 3, 1997, provides a range of mobile telecommunications services in all 31 provinces in China, autonomous regions and directly administered municipalities in Mainland China, as well as in the Hong Kong Special Administrative Region of the People’s Republic of China. Its businesses primarily consist of voice business and value-added business. As of April 30, 2010, the Company’s total number of customers reached approximately 544.2 million. As of April 30, 2010, China Mobile Communications Corporation (CMCC) owned 74.22% equity interest in the Company through intermediate holding companies. China Mobile Limited offers mobile telecommunications services principally using the global system for mobile communications (GSM) standard. Beginning from January 7, 2009, it also offers mobile telecommunications services using the time division-synchronous code division multiple access (TD-SCDMA) standard. The Company operates its third-generation (3G) business based on a core mobile telecommunications network that is shared by both its second generation (2G) and 3G businesses and TD-SCDMA wireless network capacity leased from CMCC.

Confidence Margins
Strong resistance $54.70 (+15%)
Light resistance $51.22 (+7%)
Light support $47.00 (-1%)
Strong support $45.60 (-4%)

This giant telecom company saw it's stock price drop sharply in the recent weeks for no apparent reason. This is also a great entry point for traders pondering a log term position in the company. With a dividend yield of close to 4% at current prices, this will be a position that will pay to wait. The light support is pretty close, so this is a position to watch closely.

Entry strategy
For the cautious investor:
Buy the stock for 48$ or less.

For the risk-taking trader:
A position in the June 2011 50$ call option will yield a satisfactory return to investors who will take advantage from then, they can be acquired for about 100$ per contract.

Exit Strategy
For the cautious investor:
Sell when the stock reaches 51$, or keep it until 54$ if you are more bullish in your own analysis.

For the risk-taking trader:
The contracts should be kept until the underlying reaches around 51$. This should provide a very interesting return if the underlying reaches the target price as the contracts will get in the money.

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