Fox Factory designs, manufactures and sells high-performance components (particularly shock absorbers and suspensions) for various types of vehicles including bicycles, motorcycles, off-roaders, ATVs and snowmobiles. The company distributes its products via a global dealer network and also offers a specialised development service to vehicle original equipment manufacturers (OEMs).
In terms of fundamental performance, Fox enjoyed heathy growth in FY22, with earnings and revenue both climbing ~22%. The company, however, had a tough start to its new financial year. 1Q23 revenue grew just 5.8%, while earnings declined 9.1% as inflationary pressures bit.
Technically, the stock price is displaying a pattern of higher lows (HL) and higher highs (HH), indicating a potential bullish trend (see the main chart as well as the insert).
In essence, the stock is undergoing a series of price retracements whereby each subsequent low is above the previous. This suggests that buyers are entering the market at higher price levels, implying positive momentum that may ultimately drive a sustained increase in the near term.
The stock is currently testing its 200-day simple moving average (SMA) of ~$103. This is seen as an opportune time for investors to enter the stock (or add to their positions) adding to buying pressure.
Fading downside momentum according to the MACD indicator, and sidewards movement of the On-Balance Volume indicator, further substantiates our bullish stance.
Share Information
| Share code | FOXF US |
|---|---|
| Industry | Automobiles & Components |
| Market Capital (USD) | 4.47 billion |
| One year total return | 18.71% |
| Return year-to-date | 15.85% |
| Current price(USD) | 105.69 |
| 52 week high(USD) | 127.54 |
| 52 week low(USD) | 73.05 |
| Financial year end | December |
| Closing paragraph | The share price has performed well over the last year and various technical indicators suggest further upside in the next few months. |
Consensus Expectations (Bloomberg)
| FY22 | FY23E | FY24E | FY25E | |
|---|---|---|---|---|
| Headline Earnings per Share (USD) | 5.49 | 5.16 | 6.15 | 8.34 |
| Growth (%) | -5.97 | 19.23 | 35.50 | |
| Dividend Per Share (USD) | 0.00 | 0.00 | 0.00 | 0.00 |
| Growth (%) | - | - | - | |
| Forward PE (times) | 18.61 | 14.52 | 12.67 | |
| Forward Dividend Yield (%) | - | - | - | |
| Closing paragraph | The market expects a slight slowdown in growth in FY23 due to lingering labour and supply-chain cost pressures. These will likely subside in the medium-term, and growth will be bolstered by an improvement in demand as customer-related headwinds (including high interest rates) dissipate. | |||
Buy/Sell Rationale
Technical Analysis:
Long-term fundamental view:
| Share Name and position |
COST - Time Exit (Close the position) |
AIG - Buy (Continue to hold) |
VXF - Buy (Continue to hold) |
|---|---|---|---|
| Entry | 501.27 | 54.72 | 139.26 |
| Current | 537.37 | 57.60 | 146.06 |
| Movement | 7.2% | 5.3% | 4.9% |
| Summary text | The trade has reached our proposed time exit and we have opted to close the position. |
The stock is displaying a broadening top pattern. The price is currently above its 200-day simple moving average. Upside momentum continues to support the bullish trend.
Our profit target is $62 with a trailing stop-loss of $54. Exit the position on 2 August 2023. |
An incomplete symmetrical triangle pattern remains of interest. The ETF is trading above its 200-day simple moving average; however, upside momentum has halted, which is a concern.
Our profit target is $153 with a trailing stop-loss at $140.20 Exit the position on 2 November 2023. |
| Share Name and position |
LIT - Buy (Continue to hold) |
BKR - Buy (Continue to hold) |
HACK - Buy (Continue to hold) |
|---|---|---|---|
| Entry | 62.48 | 30.17 | 47.58 |
| Current | 65.52 | 31.60 | 49.69 |
| Movement | 4.9% | 4.7% | 4.4% |
| Summary text |
The stock is trading in a falling wedge pattern within a previous uptrend. The stock is slightly above its 200-day simple moving average. Upward momentum supports the bullish bias.
Our profit target is $71 with a trailing stop-loss at $62.15. Exit the position on 30 August 2023. |
The price movement suggests a formation of a symmetrical triangle pattern. Furthermore, the price is above the 200-day simple moving average supported by continued upward momentum.
Our profit target is $35 with a trailing stop-loss at $29.50. Exit the position around 23 August 2023. |
The price remains above critical support levels and trade continues above the 200-day simple moving average. Upside momentum, however, has faded.
Our profit target is $55 with a trailing stop-loss of $47.70. Exit the position around 4 August 2023. |
