Monday, April 18, 2011

Lumber Liquidators Holdings Inc. (NYSE: LL) Q2 2011 Price Target

Recent price: 23.93$
P/E Ratio: 25.74
3 Months Target Price: 29$

Company Description
According to Reuters, Lumber Liquidators Holdings, Inc. is a specialty retailer of hardwood flooring in the United States. The Company offers a selection of hardwood flooring products under multiple brands. As of December 31, 2009, the Company sold its products through 186 Lumber Liquidators stores in 45 states. It offers an assortment of hardwood species, engineered hardwoods and laminates direct to the consumer. The Company also features the renewable flooring products, bamboo and cork, and provides a selection of flooring enhancements and accessories, including moldings, noise-reducing underlay and adhesives. These products are primarily sold under the Company’s private label brands, including the Bellawood brand floors.

Confidence Margins
Strong resistance $33.41 (+40%)
Light resistance $28.96 (+21%)
Light support $21.09 (-12%)
Strong support $19.33 (-19%)

Back in February 2011, Lumber Liquidators Holdings issued guidance for their 2011 revenue barely in line with what analysts were expecting. This sent the stock falling from quite a high cliff and it pretty much hovered around those prices since then. Because a more recent drop, shares of this company are offering a great entry point for the coming quarter.

Entry strategy
For the cautious investor:
Buy the stock for 24.50$ or less as it is currently in a uptrend.

For the risk-taking trader:
The August 2011 25$ out-of-the-money call option contract seems to be the right position to take, they can be acquired for about 175$ per contract.

Exit Strategy
For the cautious investor:
Sell when the stock reaches 29$, or keep it until 33$ if you are more bullish in your own analysis.

For the risk-taking trader:
The contracts should be kept until the underlying reaches around 29$. 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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