business newsHow to Play Smith & Wesson Ahead of Earnings
By
Andrew Keene
Dec 06, 2012 1:31 pm
With all the positive outlooks and good news coming out of SWHC, it seems logical to be bullish.
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MINYANVILLE ORIGINAL Guns, guns, and more guns -- this seems to be the latest slogan that the American people are rallying behind, and Smith & Wesson (NASDAQ:SWHC) is the benefactor of this sentiment. The Obama Administration has been having talks about a possible tightening of the reins on gun control; this is encouraging everyone from gun enthusiasts to police officers to buy their guns now, if or before the regulations come into play.
As of today, SWHC is trading in the $10.60 to $10.80 range, which is near the 52-week high of $11.24, and making new highs since the previous month, which started trading at $9.46. At the current range, SWHC is beating the 50 day, 100 day, 150 day, and 200 day moving averages of $7.24, $7.97, $8.94, and $8.48 respectively, which is a strong bullish signal. Earnings are also being reported for teh second quarter today after the close, and experts are estimating a $0.24 earnings per share (EPS). Coupled with this, SWHC has beaten earnings estimates four of the last five quarters, and the one time it fell short, it was only by 10%.
The stock has moved upward after all of the last four earnings reports averaging an exceptional 17.6% gains. The current ATM straddle implies that options traders are expecting at least a 13.5% move in either direction.
With all the positive outlooks and good news coming out of SWHC, it seems logical to be bullish.
Trade: Buy the Dec 11-12 bull call spread for $0.30.
Risk: $30 per one lot
Reward: $70 per one lot
Breakeven: $11.30
As of today, SWHC is trading in the $10.60 to $10.80 range, which is near the 52-week high of $11.24, and making new highs since the previous month, which started trading at $9.46. At the current range, SWHC is beating the 50 day, 100 day, 150 day, and 200 day moving averages of $7.24, $7.97, $8.94, and $8.48 respectively, which is a strong bullish signal. Earnings are also being reported for teh second quarter today after the close, and experts are estimating a $0.24 earnings per share (EPS). Coupled with this, SWHC has beaten earnings estimates four of the last five quarters, and the one time it fell short, it was only by 10%.
The stock has moved upward after all of the last four earnings reports averaging an exceptional 17.6% gains. The current ATM straddle implies that options traders are expecting at least a 13.5% move in either direction.
With all the positive outlooks and good news coming out of SWHC, it seems logical to be bullish.
Trade: Buy the Dec 11-12 bull call spread for $0.30.
Risk: $30 per one lot
Reward: $70 per one lot
Breakeven: $11.30
No positions in stocks mentioned.
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