The following article is an analysis of a stock that recently appeared in The HOT STOXX LETTER from DrStoxxtrading.  The author and the letter subscribers may have a position in the stock at the time of publication.

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Today’s Featured Stock: CONN’s, Inc.  (Nasdaq: CONN)          Market Cap: $554M         Annual Sales: $1.56B

Company Description: Conn’s, Inc. is listed as an electronics retail chain, but the stores also carry furniture and home goods.  It is a kind of “Best Buy” meets “Rooms to Go.”  This combination works well for the franchise with its 100+ stores across a dozen or more states in the U.S.  The company is currently at the beginning of a new growth phase following 2 years of contraction (2014 – 15) and a year of stagnation (2016).  The stock peaked near $90 at the top of the last growth cycle.  With stiff competition and the disruption of Amazon to contend with, it’s not likely the stock will return to those heights anytime soon.  But we feel that the company is very competitive in a “hot” industry and is a good choice for your retail trade over the next 3 to 6 months.

Fundamental Analysis: The company has been raising its earnings estimates over the past 2 quarters as analysts are becoming more bullish on the stock.   The company is expected to post a profit over the next 12 months.  Both Stifel and Keybanc Capital have upgraded their position on the stock to “strong buy” in recent weeks.  Shares trade at only 0.35x sales and only 3.6x free cash flow.  Both insiders and institutions have increased positions this year.  The sizable short float of 39% (huge) will have to scramble to cover if the stock can break above its recent 52-week high near $20.

Technical Analysis: The chart of CONN shows a breakout uptrend from early April following a surprisingly strong EPS report.  Late May saw a gap-fill pullback which established the lower trend-channel line.  The recent 2 week pullback has hit the channel line and the rising 50sma on oversold Stochastics.  This provides a perfect entry point.  IBD ranks CONN’s 3rd in the consumer electronic retail group with high marks for relatives strength and share accumulation.  We see shares of CONN rallying beyond $20 where a short squeeze could carry shares to the mid-20’s over the next 6 months.