Big 5 Sporting Goods Earnings Rally Brightens Technical Outlook

Big 5 Sporting Goods Corporation BGFV rocketed higher by 33% on Wednesday after the company reported a blowout third quarter. Here’s a closer look at Big 5’s numbers and how the big move may have changed the stock’s technical picture.

The Numbers

On Tuesday, Big 5 reported third-quarter EPS of 30 cents on $266.2 million in revenue. The one analyst that covers the company had anticipated just 16 cents in EPS on revenue of $265.9 million.

EPS was up slightly from 15 cents a year ago, and sales were virtually flat compared to a year ago when it reported $266.3 million in revenue.

CEO Steven Miller said Big 5 recorded its highest third-quarter gross margins since the company went public back in 2002. Miller credited the company’s mix shift toward higher-margin products for the strong quarter in a difficult retail environment.

Big 5 also guided for full-year EPS of between 22 cents and 34 cents.

Technical Outlook

While Big 5’s fundamental outlook looks to be on the upswing, Wednesday’s big move pushed the stock above $3 for the first time since April. It’s also the first time Big 5 shares have broken out meaningfully above their 200-day simple moving average since June 2018.

In the medium term, traders can be on the lookout for Big 5 to potentially close the large earnings gap it created on Wednesday morning by trading back down to around $2.50. As long as the stock bounces at the $2.50 level, it could be a bullish sign that support has risen from the $2.00 level to a higher level after the stock made a series of lower lows over the last several years.

If the stock begins making new highs in coming weeks, it could soon re-test its 2019 peak at around $4.50 from late February. Above $4.50, the next potential resistance might be its June 2018 high at around $8.80.

Big 5 bulls can also be on the lookout for the stock’s first golden cross of the 50-day SMA over the 200-day SMA since May 2018.

Benzinga’s Take

Wednesday was certainly a good day for Big 5 bulls, but they should keep the big gains in perspective. The retail space remains challenged, and Big 5 shares remain down 29.3% overall over the past year. In fact, a large part of Wednesday’s move may have simply been short covering considering the stock’s extremely high 29.2% short percent of float.

Do you agree with this take? Email with your thoughts.

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Photo credit: StellarD, Wikimedia

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