Skechers USA Inc (SKX) — SKX stock rallied off its mid-February lows along with the broader market, but its rebound was kicked off by a 7.6% one-day gain following a strong Q4 and full-year earnings report.
The athletic and casual footwear maker, which was recently named “Brand of the Year” for the second year in a row at the Footwear Industry Awards, reported record annual sales of $3.15 billion in 2015, a 32% increase over the previous year. While Q4 earnings missed estimates by a penny, they were up 36% year over year, and revenue for the quarter increased 27%, well ahead of expectations.
Following the announcement, S&P Capital IQ Equity Research cut its 12-month target price for SKX stock by $2 to $40 but reiterated its “Strong Buy” opinion.
For 2016, its analysts expect sales to increase 17% due in large part to solid gains in the international wholesale business. They also note Skechers plans to open 330 to 340 new stores this year.
SKX hit an all-time high of $54.53 in early August. But disappointing sales growth in Q3 and broader market selling took shares below $25 by mid-November, a loss of nearly 55%. As selling increased in October, a wide gap was opened from $45.01 to $34.10.
The gap remains open, and the bottom of the gap has been tested several times, forming the top of a rectangle pattern, i.e., resistance. The bottom of the rectangle, i.e., support, is at about $25.
Two buy signals from my proprietary internal indicator, the Collins-Bollinger Reversal (CBR), were triggered this year. And even though volume is currently flat, the MACD indicator issued a buy signal last week. However, a strong buy signal would be triggered when SKX stock breaks above resistance at $34.
Thus, buy SKX stock on a break of $34 with a trading target of $40 for a potential gain of more than 17%.
