Long

Will seasonal performance save DANA from a disappointing Quarter

Updated

DANA Gas has its Q1 earnings results scheduled for May 14th. Looking back on how DANA has performed, we see that it has missed 9 of its last 9 quarterly earnings. This is clearly not a good trend. Furthermore we see that analyst estimates for the upcoming quarter are only 2% less than what they expected for the same quarter last year (See fundamentals on image below for full view).

In reality the YoY results expected by analysts should have been lowered even further to account for the poor performance trend that DANA has been on. Worst, the estimates for next quarter are 45% higher than the estimates for last quarter. So Analysts are expecting a 45% increase in earnings QoQ. That's a lot of pressure on DANA.
Typically, going back since inception, Q1 earnings for DANA have been higher than Q4 61% of the time (see business cycle indicator in above figure). But still, a 45% QoQ estimate will be hard for DANA to beat or even meet, especially since it has missed for more than 2 years!

This is not necessarily all bad news though. In the black & white chart above, I show a support level below (black arrow at 62 fils) which represents great support for DANA. The gray arrow above it at 66 fils would be the minor support.

The ideal scenario for me would be for DANA to miss and then get punished with a price dip. Here I would buy DANA on the dip. One strategy is to buy at gray arrow then average down at black arrow for a two-tier entry or just buy all at the black arrow (62 fils).

The reason I expect DANA to get punished (if they miss their earnings) is because this is typically DANA's most successful quarter. So if they miss it's bad for the year!
Also because they are already fairly valued @ 70 fils according to the DCF intrinsic value model for 5 years out (see chart image above). There are better deals in the ADX.

As for the reason I expect DANA to perform well after the dip, it's due to the seasonal performance of its stock. (see seasonal performance line superimposed on black & white chart).
Here you can see that DANA is actually due for a price move upwards since February and even further up into July, but hasn't gone up much so far and instead has been consolidating sideways for 4 months.

My theory here is: once the upcoming quarter is out of the way and DANA does disappoint, the stock will sink lower then start to trend upwards to track its usual seasonal stock performance. The reason this would happen is due to promises that management make after a disappointing quarter. Remember this is usually their most successful quarter. So management has to do something to save the year.

So I'll be buying DANA at 66 fils & 62 fils and will be selling it at the resistance levels marked by the arrows (78 fils & 83 fils).
This is what I am doing with my money. You do you.

Trade active

DANA Gas quarterly earnings are now out. As expected, DANA Gas has disappointed. So far this is proceeding as planned above. The price has already dropped by 3% and is very close to my first support level of 66 fils. I am going to wait until it reaches 62 fils but it is also possible to open a two tier position here (buy at 66 fils and then average down at 62 fils).
Let's see how DANA performs the next few days. And remember, the plan is to capture the seasonal bullish move in price which typically kicks in around this time for DANA. Usually after a disappointing quarter, DANA comes out swinging with some promises to appease investors, which push the stock higher around this time. This is the trade I want to capture

ConvictionTrades

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