WWM - Analytics

    WWM

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    Today’s Trading Edge: Habit Restaurant shares plummet after delivering 2016 revenue guidance

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    Habit Restaurant Inc. (HABT) shares dropped almost 10% in after-hours trade, following the disappointing full year guidance release. For 2016, the fast-casual restaurant company, forecasted revenue between $286-290 million, slightly lower than the analyst consensus of $291 million. Same store sales was targeted to increase by 3% and capital expenditures seen at $36-38 million.  

    For the fourth quarter, earnings per share came in at $0.05 earnings per share, one cent higher than the analyst estimate. Revenue also beat with $60.6 million, the forecast was eyed at $60.5 million. The company also announced that they will be opening 30 to 32 company operated restaurants and four to six franchised/licensed restaurants.

    Prior to reporting, HABT shares appeared to have failed for a third consecutive day to close above the 50-day SMA, which as of the close traded at $21.33.

    Price action on the HABT 240-minute chart shows the initial after-hours selloff broke below the $18.50 support level. Further downward pressure may target the record low of $17.65. If we see another leg lower, price may eventually find support from the $16.52 level. It is around that area that price may form a bullish ABCD pattern. Point D is targeted with the 127.2% Fibonacci expansion level of the B to C move. If valid, we could see price stabilize and eventually target a run towards the $20 area.    

    The Trade: Buy FIT at $16.50, with a stop loss at $14.50 and a take profit at $20.50.  The Risk/Reward Ratio is 1:2


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