NEW BULLISH Plays
Freescale Semiconductor - FSL - close: 25.85 change: +0.37
Stop Loss: 24.65
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Entry on December -- at $---.--
Listed on December 27, 2014
Time Frame: 8 to 12 weeks
Average Daily Volume = 2.5 million
New Positions: Yes, see below
Why We Like It:
Headquartered in Austin, Texas, FSL has operations in more than 20 countries. According to the company, "Freescale Semiconductor (FSL) is a global leader in embedded processing solutions, providing industry-leading products that are advancing the automotive, consumer, industrial and networking markets. From microprocessors and microcontrollers to sensors, analog integrated circuits and connectivity â€“ our technologies are the foundation for the innovations that make our world greener, safer, healthier and more connected. Some of our key applications and end-markets include automotive safety, hybrid and all-electric vehicles, next generation wireless infrastructure, smart energy management, portable medical devices, consumer appliances and smart mobile devices."
FSL has beaten Wall Street's earnings estimates every quarter this year. Back in October they beat estimates by seven cents. FSL's CEO Gregg Lowe said, "Each of our five product groups has grown at double digit rates so far in 2014, and we are well positioned to continue gaining market share." Unfortunately management also lowered their Q4 revenue guidance into the $1.075 billion to $1.13 billion range. That was below Wall Street's estimate of $1.18 billion. The good news is that investors don't seem to care. Shares of FSL have been soaring from their October lows.
A couple of weeks ago Bernstein Research upgraded FSL and raised their price target from $11 to $31 a share. Forbes also ran a bullish article on FSL. According to the Forbes author FSL is extremely well positioned to take advantage of the growing use of semiconductors in automobiles. FSL is the number two player in automotive chips with 22 percent of the market. Right now every car built in the world averages about 29 semiconductor chips and six of them are from FSL. That means FSL averages about $13.75 in sales per car, globally. The Forbes article also noted that automotive semiconductor sales are expected to grow +10.8 percent over the next three years. That's 50 percent more than communication chips, which is the next fastest growing segment.
The relative strength in FSL is impressive. The stock is up significantly from its October lows. Yet after the mid-December consolidation FSL does not look quite so overbought. The point & figure chart is bullish and forecasting a long-term target near $44.00.
Today FSL is hovering just below the $26.00 level. This was resistance back in April 2014. A breakout past $26.00 could spark some serious short covering. The most recent data listed short interest at almost 20% of the 107 million share float.
Tonight we are suggesting a trigger to open bullish positions at $26.15. We will plan on exiting prior to the Q4 earnings report due out around the very end of January or early February.
Trigger @ $26.15
- Suggested Positions -
Buy FSL stock @ (trigger)
- (or for more adventurous traders, try this option) -
Buy the MAR $25 CALL (FSL150320C25) current ask $2.90
Option Format: symbol-year-month-day-call-strike