On Friday, Clorox Co. (NYSE:CLX) shares edged slightly higher as investors prepped for its upcoming quarterly results. The company will report its fiscal first-quarter 2022 results on the 1st of November after markets close. The market expects the company to miss analyst expectations amid declining sales and increasing costs.
Clorox shares spiked last year at the peak of the Covid-19 pandemic before plunging in the subsequent 12-month period. The stock is now down more than 21% over the past 52 weeks. This year alone, it has declined 18.67%, creating an exciting entry opportunity.
Is Clorox too risky to buy?
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From an investment perspective, investors will be looking at the company’s rising costs against falling sales. And given the increasing number of Covid-19 remedies, sales could fall further in the next few quarters before stabilising.
As a result, analysts expect its bottom line to worsen by more than 24% this year before recovering by 21.82% next year.
Therefore, although the stock trades at reasonable valuation multiples of 29.45 P/E and 24.50 forward P/E, investors may not be fully persuaded to bet on the stock yet.
Technically, Clorox shares seem to be trading within a descending channel formation in the intraday chart. However, the stock has recently bounced back to rally towards the 100-day moving average.
And with shares having more room left before retesting the trendline resistance, the current rebound could continue ahead of its Q1 results.
Nonetheless, given the current investor expectations, the stock could also fall sharply if it misses estimates. Therefore, investors could target upward profits at $168.38 and $172.90, while those looking to short the stock ahead of earnings could profit at $159.81 and $156.00.
A pullback could be imminent
In summary, although Clorox shares still have room left to run before reaching overbought conditions, the rally could be cut short ahead of Monday’s FQ1 results amid declining sales and rising costs.
Therefore, it could be too risky to bet on the bull run.
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