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GUESS – the apparel retail stock you can’t ignore



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Nov 07 2007
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Stocks tumble again on the Wall Street and this time we’ve another culprit that we can point our finger at. Blame it on General Motors Corp. (NYSE: GM, stock) – the company reported a loss of $39 billion, or $68.85 per share, more than the loss of $147 million, or 26 cents per share GM reported in the third quarter of 2006. The loss was its worst since the first quarter of 1992, when GM lost $21 billion.

The reason for the enormous loss: GM is taking $38.6 billion non-cash charge in the third quarter against its deferred tax assets in the U.S., Canada and Germany. In line with U.S. accounting rule, GM is writing down the assets because the three locations have seen a “three-year historical loss”.

GUESS?Anyway even when Wall Street is in red, there’re still some stocks that you can bargain-hunt. Guess?, Inc. (NYSE: GES, stock) might not be attractive in the face of warmer than normal temperatures this fall to the extent that stock investors turned their cold shoulder toward apparel retailer. Shares of GES hit a 52-week high of 57.20 on October 17 but since then have plummeted 28% with reports of insider selling.

On 6th Nov, GES raised its fiscal year earnings per share forecast from a range of $1.79 to $1.84 to a range of $1.85 to $1.90 (compare to Thomson Financial of $1.87). GES added that third quarter comparable store sales in its North American Retail segment increased double-digits and accelerated in October.

The company has been around a long time, and it’s been through some bad, bad years. And the management somehow will know how to fix the problem whenever it arises. The company has been beating earnings for the past several quarters and it’s expected to do the same when it is set to release its third-quarter financial result on 4th Dec 2007. Trading at P/E of 22 times estimated 2008 earnings GES is expected to meet huge resistance at $52 a share.

However its strength in its brand simply means you can’t ignore this stock when the share price shows weaknesses. Consider the GES Mar 2008 45 Call Option which will have 135 days to your advantage before expiry.



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Dear FinanceTwitter :

The market plunged 300 points. The Asian markets would be hit tommorrow after Depavali holiday.

Take note of GES stock movement nearing earnings announcement. If it goes up too high and too quickly prior to earnings, it would indicate high expectations have been piled towards an exceptional quarter.

If GES did not report well above consensus or did not raise its bar in its forward guidance, the stock would be punished almost immediately after earnings announcement.

So, investors do be careful. Or should we learn from stocktube how to make money from GOOG 🙂

Yours Truly,

Tony Chai
My Options Trading Blog

hello tony,

yeah, dow down 360points again *yawn* … somehow i’m getting used to such plunges since the subprime crisis bubble burst …

i’m well aware of the risk with GES … the fact that the stock managed to grab stockscouter of only 3 scares lots of investors out there …

but does that means this stock is doomed and the brand vanish from the planet earth? don’t think so … $44 is the crucial support with $50 as the resistance and as long as the stock trades above $46, i’m quite comfortable with it …

of course if GES could not beat earnings, it will be punished but that’s not the main criteria here as historically stocks that beat but issue lower or inline guidance could be punished as well ..

and since GES raised its fiscal year earnings per share forecast from a range of $1.79 to $1.84 to a range of $1.85 to $1.90, why not ride on the wave …

having said that does not mean i can’t close the position before the earnings announcement …

hmmm, i actually made money from GOOG out of “luck” *grin* …

cheers …

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