Monday, April 18, 2011

Sanmina-SCI Corporation (NASDAQ: SANM) Q2 2011 Price Target

Recent price: 10.62$
P/E Ratio: 9.64
3 Months Target Price: 16$

Company Description
Information provided by Reuters tells us that Sanmina-SCI Corporation is an independent global provider of customized, integrated electronics manufacturing services (EMS). The Company provides these services primarily to original equipment manufacturers (OEMs), in the communications, enterprise computing and storage, multimedia, industrial and semiconductor capital equipment, defense and aerospace, medical, renewable energy and automotive industries. The Company’s services include product design and engineering, including initial development, detailed design, prototyping, validation, preproduction services and manufacturing design release; manufacturing of components, subassemblies and complete systems; final system assembly and test; direct order fulfillment and logistics services, and after-market product service and support. The Company manufactures products in 18 countries on five continents.

Confidence Margins
Strong resistance $17.32 (+63%)
Light resistance $16.04 (+51%)
Light support $9.95 (-6%)
Strong support $8.92 (-16%)

Sanmina-SCI Corporation's shares tumbled on the day the company announced the departure of it's President. A Couple of days later, the company report it's second quarter figures and revenue guidance for the rest of the year. All those events combined sent the stock down enough for it to reach a strong support. Now is probably the best time to open a long position.

Entry strategy
For the cautious investor:
Buy the stock for 11$ or less.

For the risk-taking trader:
The June 2011 11$ out-of-the-money call option contract seems to be the right position to take, they can be acquired for about 100$ per contract.

Exit Strategy
For the cautious investor:
Sell when the stock reaches 16$, or keep it until 17$ if you are more bullish in your own analysis.

For the risk-taking trader:
The contracts should be kept until the underlying reaches around 16$. 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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