Step Up to Skechers
07/22/2014 7:00 am EST
Our latest featured breakout candidate—a maker of footwear—has a bullish setup; the tape action shows some aggressive institutional bargain hunting, observes Leo Fasciocco, editor Ticker Tape Digest.
With annual revenues of $2 billion, Skechers USA, Inc. (SKX) operates 122 concept stores, 131 factory outlet stores, and 71 warehouse outlet stores in the United States, and 44 concept stores and 26 factory outlets internationally.
SKX's stock is in good position to be accumulated in anticipation of a breakout from a seven-week flat base.
SKX's long-term chart shows the stock with a very cyclical long-term pattern, rising and falling since the late 1990s from $10 to $40, from $5 to $38, from $5 to $44.90, and lastly from $11 in early 2012 to an all-time high of $47.53 in June.
Currently, SKX is in a well-formed flat base above its rising 50-day moving average line. This is a bullish setup for a possible breakout. The tape action showed some aggressive institutional bargain hunting.
This year, analysts are forecasting a 91% surge in SKX's earnings to $2.06 a share from $1.08 a year before. The stock sells with a price-earnings ratio of 22. We see that as attractive to value-growth investors.
We see good chances for an upside earnings surprise. The prior two quarters. SKX topped the consensus estimate by 28 cents a share, or by 85%, and by 11 cents a share, or by 65%. Impressive!
Going out to 2015, the Street projects a 31% gain in net to $2.69 a share from the anticipated $2.06 a share this year.
Institutional sponsorship is excellent. The largest fund holder is the 5-star rated Fidelity Growth Company Fund, which was a recent buyer of 238,636 shares. Also, the 5-star rated Hennessy Cornerstone Mid-Cap 30 Fund was a recent purchaser of 41,500 shares.
We are very bullish on SKX. We view the stock as an excellent intermediate-term play provided earnings meet expectations.
We suggest accumulation of a partial stake, with further buying to be done on a move over $47.80. We are targeting SKX for a move to $58 after a breakout. A protective stop can be placed near $45, which is tight.
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