Lockheed Martin Corporation (LMT) — With LMT stock on the verge of issuing a strong sell signal and shares overvalued according to fundamental analysts, now is a good time to sell or short the stock.
While this blue-chip defense company is also a major aerospace supplier, about 93% of total revenues come from global defense sales. So continued declines in U.S. and European defense spending could hurt shares.
S&P Capital IQ Equity Research rates LMT stock a “Sell” with a 12-month price target of $197, which is more than 17% below Friday’s close.
Despite a 2.9% decrease in shares outstanding thanks to an aggressive share repurchase program, the company still fell short of analysts’ Q1 earnings estimates. Following the miss, Capital IQ lowered its full-year earnings estimates by 5.5% to $11.85 per share.
Turning to the chart, LMT stock broke down from the apex of a triangle at $239. A close under the 50-day moving average at $236 would trigger a strong sell signal with the next support at $220, the 200-day moving average.
However, if LMT stock breaks below the 50-day, we can assume a long-term reversal has occurred and that the 200-day moving average will not hold. In this case, we could see shares fall back to the February lows. MACD is negative and sellers have increased recently.
If you own shares, consider selling them at the market price. Traders can look to sell LMT stock short on a break below $236 with a downside target of $210 or lower for a potential return of at least 11%.
Be aware that you will be responsible for paying any dividends to the owner of the stock if you hold shares short through an ex-dividend date. The next ex-dividend date is expected in late August, and Lockheed Martin pays a quarterly dividend of $1.65 per share for a forward yield of 2.8%.
