Why Cabela's Shares Surged

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Cabela's (NYSE: CAB  ) were up as much as 13% today, after the outdoor retailer surprisingly raised its first-quarter guidance ahead of its annual investor meeting tomorrow.

So what: The hunting and fishing specialist said sales in most of its segments were up strongly and that it now sees per-share profits of $0.57 to $0.62 against analyst estimates of $0.47. Cabela's also said the same-store sales percentage increase should be in the high teens and that direct revenue, which is made up of online and catalog, is expected to grow at a percentage rate in the low to mid-teens.

Now what: The company didn't say which categories improved the most, but some analysts believe the nationwide surge in gun sales following the Sandy Hook massacre in December helped boost the company's outlook. There's no question that the improvement in guidance is a good sign, but a 13% jump in the stock based on an additional $0.10 to $0.15 increase in EPS seems exaggerated. I'd like to see evidence of a longer trend before I got invested.

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  • Report this Comment On March 12, 2013, at 8:33 PM, HectorLemans wrote:

    Tend your ear to me and I will tell you a sad story:

    Last October I bought 6000 Cabela's March 16th 2013 call options at 85 cents a piece ($5,100). After the Newtown shootings, the share price plunged but I wasn't too worried since the end date was a ways away. The shares briefly surged at the end of January of this year and I was looking at a $4000 profit. "No," I thought. "They report earnings in February and I'm sure they'll surge even more. Worst-case, they stay about even and I cash out with a nice profit." February 14th they report earnings and the share price tanks 5%. Ouch. The options are worth about 50 cents now. Things get worse. The shares keep slowly going down. I'm kicking myself for not taking the $4k profit. The options get down to 10 cents. I'm thinking, "Screw you market! I'll wait for them to expire even if they're worthless!". Then early this month they go up. The options get back to 50 cents. "Well," I think. "I guess maybe I shouldn't be so pig-headed and just get out. Be thankful for getting some of your money back." So I sell. $2100 loss. Three days later, shares Cabela's issue earnings update. Shares surge 12% and those options are now worth $5.73 a piece. Yeah. I just forfeited a $29k profit. Ouch. Live and learn.

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