Icahn Enterprises (IEP) has had an interesting week, as the stock is currently up 20% in today’s trading session Friday. But, the stock tanked more than 45% earlier in the week.
This came after the company was the latest victim to be targeted by Hindenburg – a short seller with a history of releasing reports that attempt to devalue a company, while Hindenburg takes a short stance.
These reports are typically released in an effort to expose fraud or other shortcomings, and Hindenburg uses media and its own following to capitalize on the downfall of the company in question.
So, what are the claims made in the latest Hindenburg report that sent Icahn Enterprises to its lowest point in more than a decade? Tuesday, the firm claimed that Icahn overvalues its holdings and implements a Ponzi scheme structure to pay dividends.
Carl Icahn, the face and name behind the company, was quick to release a statement denying these accusations in an attempt to ease investor anxiety as the stock tanked. After losing more than $6 billion in a single day, it’s safe to say Mr. Icahn has had his cage rattled by this news.
He called Hindenburg a self-serving organization and plans to defend the tactics used at Icahn at length in the near future. For now, though, Icahn Enterprises will distribute $2 per depositary unit to shareholders in an effort to reverse the trend that formed after the Hindenburg report went out.
We wrote recently about the effects Hindenburg’s research has on swaying market sentiment with its reports and subsequent short stance when they targeted Block just a few months ago.
We said it then, and we’ll say it again now – in moments like this, it’s important to tune out the noise associated with Hindenburg claims and just look at the stock purely from a technical analysis standpoint. So, is there actually anything for IEP investors to be worried about? Maybe. Here are 3 things we found through the VectorVest stock analysis software…
Despite Fair Upside Potential, IEP Has Poor Safety and Timing
The VectorVest system can help you tune out the noise and simplify your trading strategy. In just 3 simple ratings, you’re given all the information you need to find opportunities and execute trades with confidence.
These are relative value (RV), relative safety (RS), and relative timing (RT). Each sits on its own scale of 0.00-2.00 with 1.00 being the average. And based on the overall VST rating for a stock, VectorVest offers a clear buy, sell, or hold recommendation - at any given time. As for IEP, here’s what you need to know:
- Fair Upside Potential: The RV rating looks at a stock’s 3-year price projection compared to AAA corporate bond rates and risk, helping you gain a better understanding of the true value of a stock. As for IEP, the stock has an RV rating of 0.89 - which is below the average, but deemed fair nonetheless. With that said, the stock is overvalued right now - with a current value of just $15.
- Poor Safety: In terms of risk, IEP has poor safety - as evidenced by the RS rating of 0.73. This rating is calculated by analyzing the company’s financial consistency & predictability, debt-to-equity ratio, and business longevity.
- Poor Timing: After the Hindenburg report, a negative price trend sent IEP stock tanking - and that’s reflected by the poor RT rating of 0.55. This rating is based on the direction, dynamics, and magnitude of the stock’s price movement. It’s taken day over day, week over week, quarter over quarter, and year over year.
The overall VST rating of 0.72 is poor for IEP. So, Hindenburg research aside, is it time to sell your shares? Or, is this an opportunity to buy into the company at a lower price point before the inevitable reversal - which may already be in the midst of forming in Friday’s trading session?
Don’t play the guessing game or let emotion influence your decision-making. Get a clear answer on your next move through a free stock analysis at VectorVest today. You’re not going to want to miss this one!
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VectorVest advocates buying safe, undervalued stocks, rising in price. While it’s always important to take any Hindenburg report with a grain of salt, IEP does have problems purely from a stock analysis standpoint - while the upside potential is fair, the stock has poor safety and timing.
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