Monday, May 9, 2011

Harmonic Inc. (NASDAQ: HLIT) Q3 2011 Price Target

Recent price: 7.76$
P/E Ratio: -
3 Months Target Price: 9.50$

Company Description
Harmonic Inc. designs, manufactures and sells video products and system solutions that enable service providers to deliver the broadcast and on-demand services, including high-definition television (HDTV), video-on-demand (VOD), network personal video recording and time-shifted television. It also provides its video processing solutions to telecommunications companies, or telcos, broadcasters and on-line media companies that offer video services. Its products fall into two principal categories: video processing solutions and edge and access products. It also provides technical support services to its customers worldwide. Its video processing solutions includes network management software and application software products. Its edge products enable cable operators to deliver customized broadcast or narrowcast on-demand and data services to their subscribers. Harmonic’s access products consist mainly of optical transmission products, node platforms and return path products.

Confidence Margins
Strong resistance $10.05 (+30%)
Light resistance $9.45 (+22%)
Light support $6.95 (-10%)
Strong support $6.37 (-18%)

Shares of Harmonic Inc fell sharply on May 29th as the company announced operating results for it's first quarter of 2011. Results and revenue guidance came under what analyst's were expecting and this caused the shares to follow a steep downtrend. Right now, as prices have stabilized, they provide a good entry point for the quarter that will end in November 2011.

Entry strategy
For the cautious investor:
Buy the stock for 8.00$ or less.

For the risk-taking trader:
The October 2011 10$ out-of-the-money call option contract seems to be the right position to take, they can be acquired for about 25$ per contract.

Exit Strategy
For the cautious investor:
Sell when the stock reaches 9.50$, or keep it until 10$ if you are more bullish in your own analysis.

For the risk-taking trader:
The contracts should be kept until the underlying reaches around 9.50$. 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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