A few months ago I noted the compelling insider buying activity in Fossil, Inc. (among others). Well, it turns out management clearly liked what they were seeing in the underlying business trends. Yesterday the company announced earnings that handily beat Wall Street estimates and caught a large number of short sellers off guard. Today the stock has roughly doubled in price.
Fundamentally, it looks like the loss in revenue from falling demand for traditional watches is starting to be offset by increasing demand for smart watches. Even after today’s surge in price, the stock trades at a valuation that almost takes for granted that it is going out of business. The Q4 earnings report, especially the 2018 guidance, suggests this is far too bearish an assessment.
That said, the stock looks like it’s running into important longer-term resistance right now. For this reason, I would expect it to do some backing and filling below that trend line over the short run. Longer-term, however, the momentum has clearly shifted and if the company hits its 2018 financial targets the stock could easily go from a double to a triple. The next layer of resistance just so happens to be in the $25-30 range.