Monday, May 9, 2011

Trimble Navigation Limited (NASDAQ: TRMB) Q3 2011 Price Target

Recent price: 43.87$
P/E Ratio: 47.28
3 Months Target Price: 30$

Company Description
Trimble Navigation Limited, incorporated in 1981, provides advanced positioning product solutions, to commercial and government users. The principal application areas include surveying, agriculture, construction, asset management, mapping and mobile resource management. Trimble’s products include agricultural and construction equipment, guidance systems, surveying instruments, systems that track fleets of vehicles, data collection systems that enable the management of large amounts of geo-referenced information, and information asset management systems for construction and agricultural markets. In addition, the Company also manufactures components for in-vehicle navigation and telematics systems, and timing modules used in the synchronization of wireless networks. It operates in four business segments: Engineering and Construction, Field Solutions, Mobile Solutions and Advanced Devices.

Confidence Margins
Strong resistance $54.00 (-23%)
Light resistance $52.05 (-19%)
Light support $39.35 (+10%)
Strong support $27.72 (+37%)

In the beginning of the month, Trimble Navigation Limiter provided analyst's with an EPS guidance that came short of expectations. This is a major blow for the company and it provides a good point of entry to short sell the company.

Entry strategy
For the cautious investor:
Sell short the stock for 44$ or more.

For the risk-taking trader:
The November 2011 40$ out-of-the-money put option contract seems to be the right position to take, they can be acquired for about 390$ per contract.

Exit Strategy
For the cautious investor:
Buy to cover when the stock reaches 30$, or keep it until 28$ if you are more bullish in your own analysis. It is highly recommended to keep the position on check if it goes sour as a favorable upside market movement could have devastating consequences.

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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