Monday, June 13, 2011

Cracker Barrel Old Country Store Inc (NASDAQ: CBRL) Q3 2011 Price Target

Recent price: 44.21$
P/E Ratio: 11.07
3 Months Target Price: 54$

Company Description
According to data provided by Reuters, Cracker Barrel Old Country Store, Inc. is principally engaged in the operation and development of the Cracker Barrel Old Country Store restaurant and retail concept (Cracker Barrel). As of September 21, 2010, it operated 595 full-service restaurants and gift shops in 41 states. The format of its stores consists of a trademarked rustic, old country-store design with a separate retail area offering a variety of decorative and functional items featuring rocking chairs, holiday and seasonal gifts and toys, apparel, cookware and foods, including candies and jellies. Store interiors are subdivided into a dining room consisting of approximately 27% of the total interior store space, and a retail shop consisting of approximately 23% of such space, with the balance primarily consisting of kitchen, storage and training areas. All stores have stone fireplaces. 

Confidence Margins
Strong resistance $57.79 (+31%)
Light resistance $53.86 (+22%)
Light support $42.79 (-3%)
Strong support $36.17 (-18%)

Cracker Barrel Old Country Store Inc release it's third quarter results and analysts did not like what they saw. Not only did earnings come short of expectations, but earnings and sales guidance also came short. This event provides investors with the possibility to enter in this company at a more fair price. Profits are still here and the company seems to have set the bar low for the next time it files it's earnings.

Entry strategy
For the cautious investor:
Buy the stock for 45$ or less.

For the risk-taking trader:
The september 2011 45$ out-of-the-money call option contract seems to be the right position to take, they can be acquired for about 240$ per contract.

Exit Strategy
For the cautious investor:
Sell when the stock reaches 54$, or keep it until 57$ if you are more bullish in your own analysis.

For the risk-taking trader:
The contracts should be kept until the underlying reaches 54$. This should provide a very interesting return if the underlying reaches the target price as the contracts will get in the money.

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