By Peet Serfontein & Jalpa Bhoolia.
Lamb Weston is one of the largest frozen potato companies in the world and a leading supplier of frozen potato, sweet potato, appetiser and vegetable products to restaurants and retailers around the globe. The company has locations across North America, Europe, Asia, Australia, and Latin America.
Technically, a price that appears to be forming classical geometrical angles makes for an appealing investment opportunity (see the trendlines with angles on the main chart). Geometrical angles are often associated with Gann angles or Gann lines and are used to identify potential support and resistance levels in a price chart.
A Gann angle is formed by a diagonal line that represents a specific rate of price change over time, which can then be used to predict price movements. By drawing these angles from significant price lows, investors can project potential future support levels. If the price bounces off these angles, it reinforces the bullish trend. For example, a 45-degree angle is often considered the most significant - if the price stays above this angle, it is often interpreted as a bullish signal.
According to the RSI (Relative Strength Index), the stock will be overbought at ~$125, which classifies our profit target at $112 as realistic.
We suggest a medium capital at-risk allocation to this trade.
Share Information
| Share Code | LW |
|---|---|
| Industry | Packaged food |
| Market Capital (USD) | 14.22 billion |
| One Year Total Return | 15.15% |
| Return Year-to-Date | 11.05% |
| Current Price (USD) | 98.14 |
| 52 Week High (USD) | 117.38 |
| 52 Week Low (USD) | 81.26 |
| Financial Year End | May |
| Several technical indicators suggest further upside price momentum. The share is trading below its 200-day simple moving average of ~$102.50. |
Consensus expectations
(Bloomberg)
| FY22 | FY23E | FY24E | FY25E | |
|---|---|---|---|---|
| Headline Earnings per Share (USD) | 4.68 | 5.90 | 6.11 | 6.50 |
| Growth (%) | 26.00 | 3.68 | 6.35 | |
| Dividend Per Share (USD) | 1.05 | 1.16 | 1.28 | 1.30 |
| Growth (%) | 10.29 | 10.36 | 2.03 | |
| Forward PE (times) | 16.64 | 16.05 | 15.09 | |
| Forward Dividend Yield (%) | 1.18 | 1.30 | 1.33 | |
| Consistent earnings growth is expected over the forecast horizon. The stock holds a Beta of 0.88, which indicates that it is slightly less volatile relative to the overall stock market. | ||||
Buy/Sell Rationale
Technical Analysis:
Long-term fundamental view:
| Share Name and position | CRM - Buy (Continue to hold) |
AMZN - Buy (Continue to hold) |
KO - Buy (Continue to hold) |
|---|---|---|---|
| Entry | 178.19 | 138.07 | 55.78 |
| Current | 224.32 | 143.90 | 57.15 |
| Movement | 5.9% | 4.2% | 4% |
|
A price developing an ascending broadening wedge pattern remains of interest. The stock remains above its 200-day moving average. The trade idea is backed by the start of upside price momentum.
Our profit target remains at $240 with a trailing stop-loss at $213.10. Exit the trade around 6 February 2024. |
A megaphone pattern remains of interest. The stock remains above its 200-day moving average. The trade idea is backed by upside momentum.
Our profit target remains at $200 with a trailing stop-loss at $134.80. Exit the trade around 23 February 2024. |
The price has been consistently recovering within the lower range of an upward-trending linear regression channel. Although the price remains below its 200-day moving average, it is gradually nearing this level.
Our profit target remains at $61 with a trailing stop-loss at $56. Exit the trade around 12 January 2024. |
| Share Name and position | LVS - Buy (Continue to hold) |
HPE - Buy (Continue to hold) |
GILD - Buy (Continue to hold) |
|---|---|---|---|
| Entry | 49.47 | 15.74 | 80.00 |
| Current | 49.44 | 15.62 | 74.69 |
| Movement | -0.1% | -0.8% | -6.6% |
|
The price appears to be counter-testing a bearish trend which remains of interest. The stock remains below its 200-day moving average. Upside price momentum is supportive of the trade idea.
Our profit target remains at $58 with a trailing stop-loss at $46. Exit the trade around 7 February 2024. |
A price that appears to be developing an incomplete ascending triangle pattern remains of interest. The stock remains just below its 200-day moving average. Fading downside price momentum is supportive.
Our profit target remains at $18 with a trailing stop-loss at $15. Exit the trade around 23 February 2024. |
The stock remains below its 200-day simple moving average. Downside price momentum is a concern.
Our profit target remains at $97 with a trailing stop-loss at $73. Exit the trade around 19 April 2024. |
