Monday, April 18, 2011

American Axle & Manufacturing Holdings Inc. (NYSE: AXL) Q2 2011 Price Target

Recent price: 11.35$
P/E Ratio: 7.33
3 Months Target Price: 14$

Company Description
Data provided by Reuters shows that American Axle & Manufacturing Holdings, Inc. (AAM) manufactures, engineers, designs and validates driveline and drivetrain systems and related components and chassis modules for light trucks, sport utility vehicles (SUVs), passenger cars, crossover vehicles and commercial vehicles. Driveline and drivetrain systems include components that transfer power from the transmission and deliver it to the drive wheels. The Company’s driveline, drivetrain and related products include axles, chassis modules, driveshafts, power transfer units, transfer cases, chassis and steering components, driveheads, crankshafts, transmission parts and metal-formed products. During the year ended December 31, 2010, AAM entered into a joint venture with Saab Automobile AB (Saab), in which the new company, e-AAM, engineers and develops eAWD hybrid driveline systems to be commercialized for passenger cars and crossover vehicles.

Confidence Margins
Strong resistance $16.20 (+43%)
Light resistance $14.88 (+31%)
Light support $11.16 (-2%)
Strong support $10.43 (-8%)

Over the past few weeks,American Axle & Manufacturing Inc has seen it's shares tumble for no particular reason. Indicators are however showing that current price levels are getting close to a reversal in the trend. This will prove to be a profitable position.

Entry strategy
For the cautious investor:
Buy the stock for 11.50$ or less.

For the risk-taking trader:
The July 2011 12$ out-of-the-money call option contract seems to be the right position to take, they can be acquired for about 90$ per contract.

Exit Strategy
For the cautious investor:
Sell when the stock reaches 14.50$, or keep it until 16$ if you are more bullish in your own analysis. The stock is currently in a downtrend, it deserves closer attention as it comes neat the support lines.

For the risk-taking trader:
The contracts should be kept until the underlying reaches around 14.50$. 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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