NEW BULLISH Plays
Cabela's Inc. - CAB - close: 56.27 change: -0.30
Stop Loss: 53.95
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Entry on March -- at $---.--
Listed on March 09, 2015
Time Frame: 8 to 12 weeks
Average Daily Volume = 1.0 million
New Positions: Yes, see below
Why We Like It:
Outdoor gear and hunting equipment retailer CAB has been misfiring the last few quarters. They have missed analysts estimates three out of the last four quarters but the stock could be mounting a turnaround.
If you're not familiar with the company, "Cabela's Incorporated, headquartered in Sidney, Nebraska, is a leading specialty retailer, and the worldâ€™s largest direct marketer, of hunting, fishing, camping and related outdoor merchandise. Since the Companyâ€™s founding in 1961, Cabelaâ€™sÂ® has grown to become one of the most well-known outdoor recreation brands in the world, and has long been recognized as the World's Foremost OutfitterÂ®. Through Cabela's growing number of retail stores and its well-established direct business, it offers a wide and distinctive selection of high-quality outdoor products at competitive prices while providing superior customer service. Cabela's also issues the Cabela's CLUBÂ® Visa credit card, which serves as its primary customer loyalty rewards program.
The company has been struggling with slowing sales and disappointing comparable same-store sales growth. They're not the only one. Companies like Dick's Sporting goods have also noted that sales in their hunting category were slow last year.
CAB's most recent report was its 2014 Q4 announcement on February 12th. Earnings of $1.11 a share missed estimates by a wide margin. Revenues were up +7.2%, which met expectations at $1.27 billion. Management said they expect a "return to a low-double-digit growth rate in revenue and a high-single to low-double-digit growth rate in diluted earnings per share for full-year 2015 as compared to full-year 2014 non-GAAP diluted earnings per share of $2.88."
The good news is that firearm sales appear to be stabilizing. After years of torrid sales during Obama's first term as president the pace of firearm sales slowed significantly. The latest data on background checks to buy a gun showed February 2015 to be the second strongest February on record. More than 1.28 million background checks were performed. That's up +1.3% from a year ago. December saw +7.5% surge in checks and January 2015 reported a +8.5% increase in background checks.
On March 3rd, 2015, gun maker Smith & Wesson (SWHC) just reported earnings that were significantly better than expected. SWHC management raised their guidance. That should bode well for CAB too.
Currently shares of CAB have bounced back toward resistance near $57.00 and its simple 200-dma. The stock appears to be breaking through resistance at its year-long trend of lower highs as well. If CAB can breakout the stock might see some short covering. The most recent data listed short interest at 16% of the 51.3 million share float. Currently CAB's point & figure chart is bullish and forecasting at $65.00 target.
Tonight I'm suggesting a trigger to open bullish positions at $57.35, which could be a new four-month high and a breakout past its January resistance.
Trigger @ $57.35
- Suggested Positions -
Buy CAB stock @ (trigger)
- (or for more adventurous traders, try this option) -
Buy the JUN $60 CALL (CAB150619C60) current ask $1.85
Option Format: symbol-year-month-day-call-strike