EOT Trade Alert – October 22, 2009

| October 22, 2009

October 22, 2009

Trade Alert:

   Buy MCRS Mar 2010 $30 Calls at $2.00 or better (MFKCF)

Company Background:

MICROS Systems (MCRS) is the leading provider of IT solutions to the hospitality and retail industries.  They design, manufacture, market, and service enterprise information management systems for hotels, restaurants, and retailers.

Short-Term Catalyst:

MCRS has weathered the recession better than most.  For fiscal year 2009 ending in June, the company’s operating income grew by 3% over 2008.  However, revenue fell 4% and earnings fell 2%.

That’s impressive considering the business environment.  July 2008 through June 2009 wasn’t exactly a great time to be in the hospitality business.

The fall in revenue and earnings caused top executive to miss out on bonuses this year.  You can bet management is highly motivated to make sure they don’t miss out again.

I’m expecting management to have the company ‘on track’ when they report fiscal Q1 2010 earnings in a few weeks.

On a technical basis, the stock is looking great.

The stock is up 68% year to date.  But it’s recently pulled back from the high.  MCRS has found support around $28.  The stock is looking very oversold at these levels.  I think it should move higher from here.

As far as the option itself, it looks undervalued to me.  And as an added bonus, the March options will give us the opportunity to see two quarterly earnings reports before they expire.

Trade Details:

Option Ticker Symbol: MFKCF
Underlying Stock Symbol: MCRS
Current Bid-Ask Price: $1.65 – $1.85
Option “Buy Up To” Price: $2.00
Break-Even On Stock At Expiration: $32.00
Maximum Risk Per Contract: $200

Exit Strategy:

MCRS is trading at $27.73 per share.  Resistance levels will be at $30.50 and again at $33.  Remember, we want this stock to move higher.  Support levels will be at $25 and $22.50.  Conservative investors should look to exit at the first support or resistance level.  Aggressive investors may want to hold for a bigger move.



Category: EOT Trade Alert

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