Skullcandy Recovers Losses from Downgrade – Now Comes the Tough Part

(This is an excerpt from an article I originally published on Seeking Alpha on October 5, 2012. Click here to read the entire piece.)

After Morgan Stanley downgraded Skullcandy (SKUL), I quickly wrote that I thought the sell-off was way overdone and marked a buying opportunity. From comments and other posts I have seen, it seems this was a common opinion amongst folks following this company. The following day, SKUL gapped up (giving me little time to buy) and has yet to look back. On Friday, October 5th, the stock reached as high as $14.58 before pulling back to $14.15. SKUL not only recovered all its losses from the Morgan Stanley downgrade, but it got “close enough” to Morgan Stanley’s price target of $15 – all in less than a month. {snip}


Skullcandy recovers its Morgan Stanley losses and now awaits a new catalyst
Skullcandy recovers its Morgan Stanley losses and now awaits a new catalyst


While maintaining support around $12, Skullcandy is printing a series of lower highs
While maintaining support around $12, Skullcandy is printing a series of lower highs

Source: FreeStockCharts.com

{snip} The general market is not likely to make much progress over the next month, so given this assumption, I decided to close out my position for now.

It is not yet clear whether short-covering will serve as a positive catalyst for shares. {snip}

The path forward for SKUL will likely remain rough (for example, watch out for a Morgan Stanley reiteration?). However, barring any negative surprises November 1st, I remain a buyer on dips.

Be careful out there!

(This is an excerpt from an article I originally published on Seeking Alpha on October 5, 2012. Click here to read the entire piece.)

Full disclosure: no positions

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