Thursday, April 7, 2011

Xyratex Limited (NASDAQ: XRTX) Q2 2011 Price Target

Recent price: 10.00$
P/E Ratio: 2.25
3 Months Target Price: 14$

Company Description
Data provided by Reuters tells us that, Xyratex Ltd. is a provider of modular enterprise-class data storage solutions and storage process technology. It designs, develops and manufactures technology that provides its customers with data storage products to support storage and data communication networks. Xyratex operates in two business segments: Networked Storage Solutions (NSS) and Storage Infrastructure (SI). Its subsidiaries include Xyratex Technology Limited, Xyratex Holdings Inc., Xyratex International Inc. and Xyratex (Malaysia) Sdn Bhd.

Confidence Margins
Strong resistance $17.68 (+77%)
Light resistance $13.46 (+35%)
Light support $9.50 (-5%)
Strong support $8.00 (-16%)

On March 31st, Xyratex Ltd issued a statement establishing it's revenue guidance for the secund quarter of 2011. It proved to be disappointing for investors who were quick to get rid of their shares. From a technical standpoint, the company offers good potential returns, but it is interesting to note the that Xyratex Ltd also offers excellent value from a fundamental point of view. Further analysis would be required for a thorough fundamental analysis but current prices make it attractive to engage a long position for this quarter.

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

For the risk-taking trader:
The August 2011 10$ in-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 13$, or keep it until 17$ if you are more bullish in your own analysis. It is highly recommended to keep the position on check if it goes sour.

For the risk-taking trader:
The contracts should be kept until the underlying reaches around 13$. This should provide a great return if the underlying reaches the target price as the contracts will get in the money.

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