Schaeffer's Market Observation Features Aeropostale: ARO.
CINCINNATI--(BUSINESS WIRE)--March 11, 2004
Today's Market Observation From Schaeffer's Investment Research features Aeropostale (NYSE:ARO). Market Observations are market-based reports that provide insight and analysis from a unique and unbiased perspective. These are published on www.SchaeffersResearch.com - the home of Bernie Schaeffer and Schaeffer's Investment Research. For additional information about this report or to have it delivered to you free via email every day click on the following link:
Aeropostale Quivers Ahead of Earnings Report
Aeropostale (NYSE:ARO) is the parent of nearly 400 mall-based stores that specialize in casual apparel and accessories for young men and women. The company's stores can be found in 35 states across the country. Eyes will be focused on ARO tonight as the retailer takes its turn in the earnings confessional after the close. Wall Street expects that the firm earned 69 cents per share in the fourth quarter, a whopping 50-percent improvement over year-ago figures of 46 cents per share. In the company's recent history, ARO has topped analysts' estimates in four of the past five quarters. Last period, however, the stock matched analysts' third-quarter per-share expectations of 56 cents.
Until very recently, ARO shares were enjoying a steady uptrend above their 10-day and 20-day moving averages. Earlier this week, the stock reached a new all-time high. Upon notching this new high, the shares began to spiral lower. ARO has dropped about 12 percent in the past three trading sessions and has violated its 20-day trendline for the first time since mid-January. What's more, the 10-day moving average is rapidly approaching a bearish cross below the 20-day, portending future weakness in the shares.
Click the following link to see the Daily Chart of ARO Since December 2003 With 10-Day and 20-Day Moving Averages: http://www.schaeffersresearch.com/wire?ID=9634.
On the upside, ARO is perched near the 32 level, which is the site of double-barreled support. First, this marked a region of resistance during the last quarter of 2003. Also, this is the site of the equity's 10-week moving average, which acted as support for the stock from March through November last year.
Click the following link to see the Weekly Chart of ARO Since March 2003 With 10-Week and 20-Week Moving Averages: http://www.schaeffersresearch.com/wire?ID=9634.
Things are not terribly uplifting for ARO from an Expectational Analysis(R) (www.schaeffersresearch.com/shop/smp_faq.aspx) perspective. That is, there are few signs that a solid "wall of worry" is in place to help lift the equity higher. First, options players have neglected the stock. In the front three-months' series, there are fewer than 2,000 open contracts (1,157 calls and 646 puts).
Second, the number of shorted ARO shares has declined since October, as bearish players begin to turn away from the retailing stock. There are now just 746,000 ARO shares sold short, which is the lowest reading since the third quarter of 2002. The resultant short-interest ratio is less than one, virtually eliminating the opportunity for a short-covering rally.
Finally, Wall Street is quite optimistic toward ARO. According to Zacks (www.zacks.com), 10 analysts currently track the shares, eight (80 percent) of whom name the stock a "buy" or better, leaving two "hold" recommendations. A disappointing earnings release could spur some downgrades from this cheery bunch.
In summary, ARO is perched at a precarious technical threshold, having dropped significantly lower over the past few sessions but sitting at potential intermediate-term support. A lack of short-interest attention, coupled with a heavy percentage of "buys" from the analyst community, suggests that expectations may be overly inflated ahead of tonight's earnings release. Watch this name with caution.
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About Schaeffer's Investment Research (www.SchaeffersResearch.com)
Schaeffer's Investment Research, founded by Bernie Schaeffer in 1981, is a financial information and trading resources company. It publishes Bernie Schaeffer's Option Advisor, the nation's leading options subscription newsletter. The firm's contrarian approach focuses on stocks with technical and fundamental trends that run counter to investor expectations. The firm's website, http://www.SchaeffersResearch.com, is recognized as one of the leading information sources for stock and options traders and was cited as the top options website by both Forbes and Barron's. Click here for more details about Schaeffer's trading methodology: http://www.SchaeffersResearch.com/method.
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|Date:||Mar 11, 2004|
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