NEW BULLISH Plays
Noodles & Co. - NDLS - close: $20.93 change: +0.29
Stop Loss: 19.90
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Entry on October -- at $---.--
Listed on October 14, 2014
Time Frame: 3 to 5 weeks
Average Daily Volume = 444 thousand
New Positions: Yes, see below
Why We Like It:
NDLS stock has had a rough start. The company held its IPO in mid 2013. The initial surge send shares of NDLS from the low $30s to over $50. Once the newness left the stock was left to churn water.
NDLS spent most of 2013 struggling and failing to breakout past $50.00 again. The last twelve months have been bearish with a trend of lower highs and lower lows. The company has disappointing results to blame for the sell-off in its stock price.
Currently NDLS has 410 locations in 31 states in the U.S. Management has suggested their long-term goal is 2,500 restaurants. That could be a challenge considering the recent sales slowdown. Their most recent earnings report was in August. You can see the big drop on the daily chart. NDLS missed estimates and lowered its 2014 guidance. Investors were not too keen on falling same-store sales growth either.
Bears have been right on this stock for months. The biggest critique is that shares of NDLS are expensive at over 50 times the trailing 12 month earnings.
While the bears may be right, NDLS is expensive, the stock's bearish momentum has stalled.
It is possible that all the bad news is priced in after a -42.5% drop this year. NDLS has seen a higher low and more recently a bullish breakout above its simple 50-dma. You'll also notice that NDLS has completely ignored the market's recent weakness. The major indices have been crashing but NDLS has been slowly marching higher.
If this strength continues NDLS could see some short covering. The most recent data listed short interest at 12.6% of the very small 21.3 million share float. The point & figure chart is already bullish and suggesting a long-term target at $27.00.
Tonight we are suggesting small positions if NDLS can trade at $21.21 or higher. If triggered I'm suggesting a target in the $24.50-25.00 zone but we will plan on exiting prior to the company's earnings report in mid November.
Trigger @ $21.21
- Suggested Positions -
Buy NDLS stock @ (trigger)
- (or for more adventurous traders, try this option) -
Buy the NOV $22.50 call (NDLS141122c22.5) current ask $1.05
Option Format: symbol-year-month-day-call-strike