Photronics jumps 10% at key support as a perfect buy opportunity emerges

Shares of Photronics, Inc. (NASDAQ:PLAB) rose more than 10% on Wednesday. The jump followed earnings that surpassed estimates. An EPS of $0.49 was higher than estimates of $0.35 and almost three times $0.17 in the prior year. The company also reported higher revenue of $204.5 million, more than estimates of $192.4 million.

In Q3, Photronics projected earnings of $0.45 to $0.55. The projection is higher than estimates of $0.37. Revenue is expected at between $205 million and $215 million, above the $196.4 million estimates. 

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Before reporting the quarterly results, analysts were already ringing buy bells. Less than two weeks ago, Stifel issued a buy rating from hold. The analysts raised the stock’s price target to $21 from the previous $19. At press time, the stock was trading at $15, representing an upside potential of 40%. 

After crashing almost 22% year-to-date, Photronics may be making a comeback. CEO Frank Lee attributed the company’s earnings and guidance to higher pricing amid robust demand. The raised guidance could take the stock higher. The technical indicators support a buy.

PLAB has held at key support for almost two months

On the daily chart, Photronics is jumping from a key bullish pin bar at the $15 support. The stock has held to the key support but lacked an immediate catalyst to go higher. With the improved earnings plus guidance, we expect PLAB to go higher. We recommend a buy of the stock at the current level. Key levels to watch are $16, $17, and $19.

Concluding throughs

Photronics rose after robust earnings and guidance. The stock sits well above the support, presenting a near-perfect buy opportunity. Investors should buy the stock at the current level for a chance to ride up to $19.

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