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Time for Tweeter
04/02/2004 12:00 am EST
"If you catch a retailer as they enter a sweet spot in consumer spending, you can make a lot of money," saysBryan Perry, editor of The Tactical Trader."We're seeing hyper-growth in home entertainment, and this theme could be one of the hottest trends for the balance of the year "
"Sales of HDTV; LCD, and DVD-type products should accelerate as the year progresses, with the upcoming holiday season probably being the peak of the current cycle. For most people, the installation of such systems is totally dependent upon the retailers that distribute those products. It's a great business that is in its nascent stage, as home theatre systems, personal video devices, and satellite-based systems are just entering mainstream pricing levels where unit sales will mushroom, driving rapid demand for installation services.
"We are recommending Tweeter Home Entertainment Group (TWTR NASDAQ), a specialty consumer electronics retailer with 174 stores in 21 states under the Tweeter, HiFi Buys, Sound Advice, Bang & Olufsen, Electronic Interiors, Showcase Home Entertainment, and Hillcrest. Its stores feature a selection of home and mobile audio and video products including HDTV, plasma, and LCD televisions, DVD players and recorders, surround-sound systems, audio components, digital video satellite systems, satellite radios, personal video recorders, and digital camcorders. Tweeter specializes in those strong pockets of demand supported by our recent data and is why the stock should trade higher in the weeks ahead.
"Historical data tells us we have to buy retail stocks while the news is still soft or lackluster. Once good news hits a retail stock, you can bet it has already made a big move up. So you've got to be real early when trading the retailers. For the quarter ended December 31, 2003, revenues increased 2% and net income decreased 2%, which is not much to crow about-yet. However, from a technical standpoint, the stock's chart suggests that business conditions are about to ramp higher. In January, the stock exploded out of a one-year base at $10, a very bullish technical development. In the recent correction, the shares held their 200-day moving average at $8.75 and rallied back up. A break above $11 would suggest a move in the stock to $15, which is our price target, representing a projected gain of 35%."
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