Stock Detective's (ibooyah reader) comments on NTRI
One of our readers calling himself “Stock Detective” recently posted a very interesting comment about NutriSystems. Since we have been publishing on iBooyah.com, “Stock Detective” has been an excellent contributor, providing detail and often insightful information about NTRI and other companies. His analysis about NTRI has been dead on in the past. The following is his latest thoughts on NTRI on 4-28-07:
Hello again! As always thanks for providing this thoughtful and interesting forum.
I agree that at this point Nutrisystem is approaching the risk side of the risk reward equation. Nevertheless, I remain bullish on the stock anticipating it making new highs before next earnings report in July.
Short term I am bearish on the stock and see a near term price decline. If one cannot stomach seeing the share price decline 8-10% consideration should be given to either selling part or all of their holdings, locking in a profit as you recommend and look for a lower entry point or hold their stock and sell covered calls. Currently the May 65 calls are offering an attractive premium as are the June 65’s. For the more adventurous consideration should be given to selling the May 60 or June 60 calls as overwrites. The reason to consider these calls is that in looking at the multi-year chart for Nutrisystem one quickly realizes that with the exception of a gap back in April ’05 NTRI has religiously filled multiple gaps in its chart. Often, the size of these gaps has seemed unfillable. However, in spite of this they have been filled.
Currently a gap exists at $58.73. I believe this will be filled in the near term and will certainly have to be filled prior to making a run to new highs. Open options positions should be closed as soon as this gap is filled if they haven’t expired because once this occurs I see big upside price movements. One other point of interest is the fact that NTRI closed towards the bottom of its trading range the day after its earnings release in spite of gapping up significantly. I think the reason it didn’t explode like AMZN has to do with the overhead supply created by the sell-off in January. Given the high volume the day after earnings release a lot of this supply may have been eradicated. However, until a new high is made overhead supply remains. The manner in which the stock is able to break through the overhead supply will determine if it should be held longer term or be added to. I do not anticipate a short squeeze coming into play until the stock is at or near its 52 week (all time) high of $76.33.
More later
Comments
Hello!
NTRI is on sale again! Blow out Q2 numbers weren’t enough for the Street. The stock tanked big time after hours yesterday due to soft Q3 guidance. However, the key phrase during yesterday’s conference call was that this guidance was based on the traditional conservatism that management uses to make such estimates.
Although I was wrong about NTRI making new highs this month before earnings I was right regarding the fact that the gap on the chart at $58.73 would be filled. Given the underlying nature of the overall market with the subprime and real estate problems yet to see their full impact on stocks any equity investment presently carries more than its share of market risk. However, the risk reward equation for NTRI again appears very favorable with the stock down over 22% from its near term high of $74.09 registered just 8 days ago. I think the market realizes the overreaction to management’s guidance. To wit NTRI is trading well above today’s low of $55.01 but still presents a bargain.
More later.
Posted by: Stock Detective | July 25, 2007 06:06 AM