Another potential earnings short squeeze play is Perry Ellis (PERY), which is set to report results on Thursday before the market open. This U.S.-based apparel company designs, sources, markets and licenses its products nationally and internationally at multiple price points and across all major levels of retail distribution. Wall Street analysts, on average, expect Perry Ellis to report revenue of $203.95 million on earnings of 4 cents per share.
Perry Ellis has been on an earnings roll of late, beating Wall Street estimates for the past four quarters in a row. Revenues have been trending higher for the past three straight quarters, with the last quarter showing a rise of 30.8%.I really like this play ahead of the quarter because the stock has been decimated by the bears during the past couple of months. PERY has fallen from a recent high of $31.50 a share to its recent low of $16.19 a share. That is one heck of a haircut, so unless the company has more bad news, this stock is very oversold. The current short interest as a percentage of the float for Perry Ellis is a reasonably large 9.3%. That means that out of the 10.72 million shares in the tradable float, 1.20 million are sold short by the bears. It's worth pointing out that the bears have been increasing their bets from the last reporting period by 19.1%, or by about 192,000 shares. The bears are pressing here with the stock already sharply down. If they're pressing too much, this stock is going to short squeeze big time off a bullish report and guidance. From a technical standpoint, this stock is trading below both its 50-day and 200-day moving averages, which is bearish. The stock is also showing an extremely oversold condition as measured by its RSI, which shows a reading of 33. An RSI around or below 30 is often an area from which a stock can bounce big. The way I would play PERY would be to wait until after its report, then buy the stock if it trades above some near-term overhead resistance at $19.45 a share on strong volume. Look for volume that's close to or greater than the three-month average action of 173,000 shares. If it takes out $19.45 to the upside, then I think this stock could bounce big all the way back towards its 50-day moving average of $23.40 a share. I would short PERY after its report only if the stock trades below some major near-term support at $16.19 a share on big volume. I would target $13 a share if that level is taken out after earnings.
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