NCR Corporation (NCR) — This global maker of information technology products, including financial and retail self-service terminals, has run into serious currency headwinds. Although analysts are encouraged by improvements in the financial services business of NCR, retail solutions lag and this year total revenues are estimated to be off 1%.
Standard & Poor’s has a 3-star “hold” on the stock. It is S&P’s opinion that NCR is fairly valued at current prices, but that risks on the stock are less favorable currency translations, a slowdown in demand and tougher competition in new product areas, especially Russia and China.
A buyout of NCR is unlikely since management had shareholders approve a “poison pill” that would discourage a deal. Q3 earnings are to be reported on Oct. 28, and the average consensus estimate is 70 cents per share. S&P is estimating 72 cents per share.
NCR topped June at over $36 and has been in a bear market since. It “double-bottomed” at about $22 on Aug. 24 and Sept. 29 and is now making a run at the resistance line at about $26 and the 200-day moving average at $28.22. I suggest waiting for earnings report since NCR has slightly exceeded quarterly estimates in the past, and the stock could be sold at a slightly higher price than Friday’s close at $25.84.
Sell NCR short at $26 with a trading target of $20 for a target return of $23%. A stop-loss order should be entered at $28. Short-sellers should also check with their broker for any unusual restrictions on shorting this stock. Although NCR is not currently paying a dividend, investors should be aware that if they are short during an ex-dividend date, they will be required to pay the dividend to the owner of the stock.