Monday, April 18, 2011

Republic Airways Holdings Inc (NASDAQ: RJET) Q2 2011 Price Target

Recent price: 5.45$
P/E Ratio: -
3 Months Target Price: 7.50$

Company Description
Republic Airways Holdings Inc., according to Reuters, offers scheduled passenger services through its wholly owned operating subsidiaries: Chautauqua Airlines, Inc., (Chautauqua Airlines), Shuttle America Corporation (Shuttle America), Republic Airline Inc. (Republic Airline), Frontier Airlines, Inc., and Lynx Airlines, Inc. (Lynx). As of December 31, 2009, the Company’s operating subsidiaries offered scheduled passenger service on approximately 1,600 flights daily to 121 cities in 44 states, Canada, Mexico, and Costa Rica under branded operations as Frontier and Midwest, and through fixed-fee code-share agreements with AMR Corp., the parent of American Airlines, Inc. (American), Continental Airlines, Inc. (Continental), Delta Air Lines, Inc. (Delta), United Air Lines, Inc. (United), and US Airways, Inc. (US Airways).

Confidence Margins
Strong resistance $9.58 (+76%)
Light resistance $7.79 (+43%)
Light support $4.74 (-13%)
Strong support $4.48 (-18%)

As an airline company, Republic Airways Holdings has been severely hit with the recent rise in the price of oil as investors are anticipating that this will negatively affect the operating performance of the company and have a damaging effect on it's profitability. At current prices, enough of the impact of the rise of the price of energy has been accounted for and RJET will provide good returns from this point.

Entry strategy
For the cautious investor:
Buy the stock for 6$ or less.

For the risk-taking trader:
The August 2011 7.50$ out-of-the-money call option contract seems to be the right position to take, they can be acquired for about 15$ per contract.

Exit Strategy
For the cautious investor:
Sell when the stock reaches 7.50$, or keep it until 9$ if you are more bullish in your own analysis.

For the risk-taking trader:
The contracts should be kept until the underlying reaches around 7.50$. 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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