It’s been less than a month since we highlighted the opportunity that shares of Cal-Maine Foods (CALM) were flashing to investors.
Read more about Cal-Maine’s bullish outlook here.
Since then, shares have rallied another 17% - 5% of that on this Monday morning – as investors are just beginning to react to building concerns that inflation will push prices higher again in 2025.
Those fears aren’t unwarranted as yields on the Ten Year Treasuries climb and the “long bond” falls ahead of the last FOMC meeting of 2024.
Read more about how to react to bonds falling back into a bear market here.
There’s good news and good news for investors that may have missed the opportunity presented last month.
First, the long-term picture remains bullish for Cal-Maine Inc.. As it stands now, the long-term outlook for the stock remains bullish as shares are thriving in what appears to be a new inflationary trade.
Second, the company is set to report its earnings tomorrow – December 17 – after the market close, and today’s price jolt may be indicative that an opportunity to “buy the dip” is approaching.
With shares trading almost 5% higher there’s a good chance that investors are simply “buying the rumor” of a solid earnings report from Cal-Maine.
It is often the case that these sharp one-day rallies ahead of any stock’s earnings represent a last-minute rush to grab shares ahead of what is perceived to be an upcoming positive news event.
These moves are followed by a “sell the news” drop immediately after their earnings reports, though the long-term trend is almost always left intact.
Looking at the historic post-earnings results for Cal-Maine shares over the last three years, sees mixed results. Last quarter, shares of CALM moved 20% higher over the following two weeks as investors reacted to positive comments from the company’s management and a continuation of its fundamental growth.
This quarter, investors will be focusing heavily on the fundamental outlook as inflation - and egg prices - are once again high on the list of investor’s fears for 2025.
Having rallied 8% over the last week, the stock is due for a short-term correction. The company’s earnings “news“ could serve as the perfect trigger for that pullback.
Investors that aren’t in the stock already, but looking for an opportunity, may want to consider the $100 price as a good long-term entry. The price is lined-up for support from the stock’s 20-day moving average. The $100 level also serves as obvious round-numbered support.
From there, investors are likely to see the stock prepare for another surge higher after a consolidation around $100.
Trading more than 100% higher in 2024, Cal-Maine is one of those interesting stocks from Wall Street’s perspective.
More than 85% of the stock is owned by institutions like hedge and mutual funds, though the stock garners no coverage from Wall Street analysts. With only two analysts covering the stock, few investors have had this stock on their radar, only the professional money managers.
Expect that Cal-Maine will attract more attention from Wall Street following any positive news in the company’s earnings report as a result. That attention will only do well to add to buying interest of Cal-Main stock with a bullish target of $140.
