Update on My ROX Position:
ROX (Castle Brands Inc): ROX Reported Earnings after close on Wednesday, August 9th. They reported a 1 cent loss per share for the first quarter of fiscal 2018 against last year’s first quarter result of break-even. It seems Wall Street didn’t like this news as shares slid to as low as $1.52 in the early hours of trading today. Shares quickly bounced back above $1.60, which is where it seemed to trade for most of the day (in the $1.60-1.70 range), eventually closing at $1.64.
Digging dipper into the earnings report, it appears Castle Brands is achieving promising results when it comes to revenues. Sales of Jefferson’s Bourbons were up over 18%, Goslings Stormy Ginger Beer over 50%, and Irish Whiskey over 30%. Total gross profit increased nearly 27% to $8.6M compared to the prior-year period of $6.7M, and net sales increased nearly 25% to $20.9 M compared to the prior-year period of $16.8M. Continued growth fueled record first quarter revenues, yet the stock still dropped sharply today. This is why I tend to shy away from earnings on most trades – it’s quite difficult to tell how the market will react to the news, good or bad.
Coupled with a down market day, I saw it as an opportunistic time to add to my position. I now hold 2100 shares at an average cost of $1.76. I’ll consider adding more if it shows strength above $1.60. The quick bounce out of the $1.50’s was a good sign of strong support at that level, but if it starts fading back down near or below that level, I’ll have to stop out. My overall profit target on this play is $2.00 or above, taking profits along the way. I was right about the growth this stock would experience, which the revenues of their most popular brands showed, but the earnings per share number didn’t please the street. I still believe this ticker will continue it’s recent uptrend (up over 115% year-to-date) or that something will materialize in terms of a buyout in the near future.
Link to Yesterday’s Watch List: 8/9 Watch List & Portfolio Updates – Sold SNAP (+8%) and WTW (-2%)
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