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Bear of the Day: Jack Henry Associates (JKHY)

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Jack Henry Associates (JKHY - Free Report) is a Zacks Rank #5 (Strong Sell) that offers technology solutions and payment processing services to community banks.

The stock was having a great year, making all-time highs above $200, before its recent earnings report. Now investors must decide if the selling was overdone or if there is a bigger issue at hand.  

2020 Was Looking Good

Jack Hnery had been marching higher all year after hitting pandemic lows around the $125 area. The stock was trading around $160 back in May when a big eps beat took the stock to $180. After a few months of trading sideways, it broke above $200 and then hit the wall after this quarter’s earnings report.

Stock plunges after EPS

The headline beat on EPS didn’t tell the whole story as the company missed on revenues. While June was the strongest sales month in the company’s history, they see headwinds regarding revenue for the first half of 2021. Year over year revenue growth slowed from 12% to 4% and payments fell to 3% from 11%.  

The stock reacted violently, moving from $200 to $180. Since the initial fall, the selling hasn’t stopped and the stock is now 16% off the highs.

Estimates

Analysts dropped estimates across all time frames after the recent earnings report.  For the current year, estimates have ticker lower by 5% over the last week, going from $3.96 to $3.76. For next year, estimates have fallen 7.3%.

Technical Take

The stock was churning around the $180 level before breaking higher. Atter earnings, that prior support was tested and failed, which helped the stock fall another leg lower. The bulls are supporting the 200-day at $165, but if that were to fail and break the recent lows, look for the $150 level to come into play. This is the 61.8% retracement from the March lows to recent highs.

In Summary

Its tempting to buy this stock after the recent drop. The 200-MA is being defended and its down almost 20% from highs. However, if we see some market weakness, that level could easily break and the traders trying to play the bounce will likely be new sellers. Be patient with this one as the fundamental issues will last into next year.


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