Stock fundamentals do not matter today. The market is waiting to see what Mario Draghi pulls out of his hat at the ECB meeting Thursday morning. This could be a boom or bust event and we are simply bystanders.
With China reporting severely negative exports on Monday and cutting the reserve rate for the 5th time there is little chance that Draghi will fail to produce at least a little in the way of additional stimulus. Whether it is enough is the big question.
Fortunately, the news will break at 7:45 ET in the morning and well before the U.S. markets open. If the futures react negatively, I would suggest you not enter any new plays. I am recommending one long play on expectations that we have a positive market. However, just because the market is open it does not mean we have to make a trade.
NEW BULLISH Plays
BBOX - Black Box Corp - Company Profile
Black Box is a leading technology solutions provider dedicated to helping customers build, manage, optimize and secure their IT infrastructure. They operate globally with more than 3,500 team members.
Black Box provides data centers, control rooms, contact centers, networking infrastructure while maintaining the highest security protocols and real time monitoring. With 70% of businesses reporting security breaches over the past 12 months it is critical to have somebody that understands the risk to manage your IT assets in all areas. The average security breach costs $3.5 million to repair and recover.
Shares rallied after they reported earnings on January 26th of 37 cents that rose +9% and beat estimates. They reported revenue of $222.5 million. They guided for the current quarter for earnings in a range of 25-30 cents and revenue of $220 million.
The company declared an 11-cent dividend payable April 14th to holders on March 31st. The company also increased the share buyback program by 1 million shares with $7 million to be purchased in March.
BBOX shares are undervalued to their peers by about 50%. The price to book multiple is .68 compared to the peer average of 2.06. They trade at a negative PE of -1.73.
This is a simple play. BBOX rallied from $8 to $13 in the days following earnings. Shares have plateaued at the $13.50 level with a slight upward trajectory. Recent intraday highs over the last two weeks have been from $13.85 to $14.11. When an eventual breakout occurs we could see a spike to $2-$3 as shorts cover and others add to their positions.
I am recommending we buy BBOX shares with a trade at $14.25 and target $16.25 for an exit.
Earnings are May 5th.
With a BBOX trade at $14.25
Buy BBOX shares, initial stop loss $12.85
No options because of wide spreads.
NEW BEARISH Plays
No New Bearish Plays