Thursday, April 21, 2011

Valassis Communications Inc. (NYSE: VCI) Q2 2011 Price Target

Recent price: 26.15$
P/E Ratio: 3.51
3 Months Target Price: 30$

Company Description
Valassis Communications, Inc. is a media and marketing services company. The Company’s RedPlum portfolio of products and services delivers value on a weekly basis to more than 100 million shoppers across a multi-media platform, in the mailbox, in the newspaper, on the doorstep, in store and online. RedPlum and provide consumers with local and national offerings across a multi-media platform on brands they want most. Its products and services are positioned to help its clients reach their customers through a mass-delivered or targeted program. The Company provides its clients with blended media solutions, including shared mail and newspaper delivery. Valassis operates through four business segments: Shared Mail, Neighborhood Targeted, Free-standing Inserts, and International, Digital Media & Services.

Confidence Margins
Strong resistance $33.48 (+28%)
Light resistance $30.15 (+15%)
Light support $25.70 (-2%)
Strong support $23.70 (-9%)

Valassis Communications' shares have been steadily trading down due to concerns of traders about it's forthcoming quarterly results. Even if it prove to be the case, current prices have fully integrated the news.

Entry strategy
For the cautious investor:
Buy the stock for 27$ or less.

For the risk-taking trader:
The June 2011 27.50$ out-of-the-money call option contract seems to be the right position to take, they can be acquired for about 140$ per contract.

Exit Strategy
For the cautious investor:
Sell when the stock reaches 30$, or keep it until 33$ if you are more bullish in your own analysis.

For the risk-taking trader:
The contracts should be kept until the underlying reaches around 30$. 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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