Monday, June 13, 2011

Supervalu Inc. (NYSE: SVU) Q3 2011 Price Target

Recent price: 8.49$
P/E Ratio: -
3 Months Target Price: 12$

Company Description
According to Reuters, SUPERVALU INC. is a United States grocery channel. SUPERVALU conducts its retail operations under the Acme, Albertsons, Bristol Farms, Cub Foods, Farm Fresh, Hornbacher’s, Jewel-Osco, Lucky, Save-A-Lot, Shaw’s, Shop ’n Save, Shoppers Food & Pharmacy and Star Market banners as well as in-store pharmacies under the Osco and Sav-on banners. Additionally, the Company provides supply chain services, primarily wholesale distribution, across the United States retail grocery channel. The Company leverages its distribution operations by providing wholesale distribution and logistics and service solutions to its independent retail customers through its Supply chain services segment. It operates in two segments: Retail food and Supply chain services.

Confidence Margins
Strong resistance $12.45 (+47%)
Light resistance $11.77 (+39%)
Light support $8.46 (0%)
Strong support $7.06 (-17%)

As the economy gets back on it's tracks, Supervalu will take advantage of it's operational and financial leverage. In the coming quarters, earnings will tends to come higher than what analyst's are expecting. There will be quite a bounce in the stock price for investors willing to wait. This company is a buy at current prices.

Entry strategy
For the cautious investor:
Buy the stock for 9$ or less.

For the risk-taking trader:
The September 2011 9$ out-of-the-money call option contract seems to be the right position to take, they can be acquired for about 80$ per contract.

Exit Strategy
For the cautious investor:
Sell when the stock reaches 12$.

For the risk-taking trader:
The contracts should be kept until the underlying reaches 12$. 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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