NEW BEARISH Plays
Artic Cat Inc. - ACAT - close: 35.17 change: -0.51
Stop Loss: 37.55
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Entry on April -- at $---.--
Listed on April 14, 2015
Time Frame: 3 to 4 weeks, Exit PRIOR to earnings in mid May
Average Daily Volume = 183 thousand
New Positions: Yes, see below
Why We Like It:
Consumer spending in the U.S. and abroad remains unimpressive and that doesn't bode well for high-ticket items like snowmobiles and ATVs.
ACAT is in the consumer goods sector. According to the company, "The Arctic Cat brand is among the most widely recognized and respected in the recreational vehicle industry. The company designs, engineers, manufactures and markets all-terrain vehicles (ATVs), side-by-sides and snowmobiles, in addition to related parts, garments and accessories under the Arctic CatÂ® and MotorfistÂ® brand names. Arctic Cat Inc.â€™s world headquarters is located in Minneapolis, Minnesota."
The company lowered guidance back in October after reporting better than expected Q2 results. They did it again in January. ACAT announced their Q3 results on January 28th. EPS was 20 cents better than expected at $0.68 a share. Yet revenues plunged -14.2% to $193.7 million, which was below estimates.
Management then lowered their fiscal year 2015 guidance to $1.24-1.32 a share compared to analysts' estimates of $1.97. ACT expects revenues in the $705-715 million versus Wall Street's estimate of $748 million.
Wunderlich Securities analyst Rommel Dionisio issued a report on ACAT in February. Dionisio said, "Though retail sales momentum for snowmobiles appears to have picked up in recent weeks, according to our proprietary dealer channel checks, Arctic Cat still appears to be seeing modest market share deterioration this winter to Polaris." He has a "hold" on the stock with a $29.00 price target.
ACAT is also dealing with a problem of too much ATV inventory at its dealers. They will take a $7 million charge to help move inventories.
Technically shares look weak. The post-earnings rally peaked in February and the stock has seen a flat to down trend of lower highs. Now the weakness seems to be accelerating with shares down -1.4% and closing below technical support at the simple 200-dma. Tonight we're suggesting at trigger to launch bearish positions at $34.95.
Plan on exiting prior to ACAT's earnings report in mid May (no date yet).
Trigger @ $34.95
- Suggested Positions -
Short ACAT stock @ $34.95
- (or for more adventurous traders, try this option) -
Buy the MAY $35 PUT (ACAT150515P35) current ask $1.90
option price is a current quote and not a suggested entry price.
Entry disclaimer: To avoid an unfavorable entry point, we will not launch a new play if the stock gaps open more than $1.00 past our suggested entry point.
Option Format: symbol-year-month-day-call-strike