Tuesday, March 29, 2011

PHH Corporation (NYSE: PHH) Q2 2011 Price Target

Recent price: 21.05$
P/E Ratio: 24.61
3 Months Target Price: 25.00$

Company Description
According to Reuters, PHH Corporation (PHH), incorporated in 1953, is a outsource provider of mortgage and fleet management services. It conducts its business through three operating segments: Mortgage Production, Mortgage Servicing and Fleet Management Services. The Company’s Mortgage Production segment originates, purchases and sells mortgage loans through PHH Mortgage Corporation and its subsidiaries (PHH Mortgage), which includes PHH Home Loans, LLC (together with its subsidiaries, PHH Home Loans or the Mortgage Venture) and Speedy Title & Appraisal Review Services LLC (STARS). Its Mortgage Servicing segment services mortgage loans originated by PHH Mortgage and PHH Home Loans, purchases MSRs and acts as a subservicer for certain clients that own the underlying mortgage servicing rights (MSRs). The Company’s Fleet Management Services segment provides commercial fleet management services to corporate clients and government agencies throughout the United States and Canada through its wholly owned subsidiary, PHH Vehicle Management Services Group LLC (PHH Arval).

Confidence Margins
Strong resistance $25.93 (+23%)
Light resistance $25.30 (+20%)
Light support $20.94 (-1%)
Strong support $19.68 (-7%)

After releasing it's fourth quarter and full year results, PHH Corporation saw it's shares getting hammered and the change of CFO did not help the market's confidence. The stock is currently in a narrow channel so investors should watch for the stock if it went under both supports as there is still some downside left in the short term.

Entry strategy
For the cautious investor:
Buy the stock for 21.50$ or less.

For the risk-taking trader:
The August 2011 22.50$ out-of-the-money call option contract seems to be the right position to take, they can be acquired for about 135$ per contract.

Exit Strategy
For the cautious investor:
Sell when the stock reaches 25$. It is highly recommended to keep the position on check as it still has some downside potential.

For the risk-taking trader:
The contracts should be kept until the underlying reaches around 25$. This should provide a satisfactory return if the underlying reaches the target price as the contracts will get in the money.

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