DryShips Inc (NASDAQ: DRYS) Q4 2011 Price Target

Recent price: 2.64$

P/E Ratio: 4.16

3 Months Target Price: 5$

Company Description

According to their SEC Filings, DryShips Inc. (DryShips) is a holding company. The Company is engaged in the ocean transportation services of drybulk cargoes and crude oil worldwide through the ownership and operation of drybulk carrier vessels and oil tankers and offshore drilling services through the ownership and operation of ultra-deepwater drilling units. As of April 12, 2011, the Company owned, through its subsidiaries, a fleet of 35 drybulk carriers comprised of seven Capesize, 26 Panamax and two Supramax vessels, which has a combined deadweight tonnage (dwt) of approximately 3.2 million dwt, and had contracts for two Panamax newbuilding drybulk carriers of 76,000 dwt. In May 2010, DryShips agreed to acquire a Panamax vessel, the MV Amalfi (ex Gemini S), which was delivered to the Company in August 2010, and agreed to sell one of its Panamax vessels, the MV Xanadu. In addition, it sold its Panamax vessel, the MV Primera. In August 2011, the Company acquired majority of OceanFreight Inc.

Confidence Margins

Strong resistance $7.11 (+135%)

Light resistance $4.95 (+31%)

Light support $2.52 (-5%)

Strong support $2.11 (-20%)

Recommendation

DryShips is a company that has it's stock subject to a lot of volatility. It however presents an impressive buying opportunity at current price, it is cheaper than on our last analysis. First, profitability is coming back to the company even if capital expenditures are rapidly increasing. The spin-off of the Ocean Rig subsidiary has partially materialized but it will greatly increase shareholder value while reducing the debt load of the holding company.

Entry strategy

For the cautious investor:

Buy the stock for 3$ or less.

For the risk-taking trader:

The January 2011 5$ out-of-the-money call option contract seems to be the right position to take, they can be acquired for about 10$ per contract.

Exit Strategy

For the cautious investor:

Sell when the stock reaches 5$, or keep it until 7$ if you are more bullish in your own analysis.

For the risk-taking trader:

The contracts should be kept until the underlying reaches 5$. This should provide a very interesting return if the underlying reaches the target price as the contracts will get in the money.

DryShips Inc (NASDAQ: DRYS) Q3 2011 Price Target

Recent price: 3.76$

P/E Ratio: 5.93

3 Months Target Price: 5$

Company Description

According to their SEC Filings, DryShips Inc. is a holding company. The Company is engaged in the ocean transportation services of drybulk cargoes worldwide through the ownership and operation of the drybulk carrier vessels and deepwater drilling rig services through the ownership of ultra-deep water drilling rigs. As of April 6, 2010, the Company owned, through its subsidiaries, a fleet of 39 drybulk carriers consisted of seven Capesize, 28 Panamax, two Supramax vessels and two Panamax newbuilding vessels, which have a combined deadweight tons of approximately 3.3 million dead weight tons. Its drybulk fleet principally carries a variety of drybulk commodities, including major bulk items, such as coal, iron ore, and grains, and minor bulk items, such as bauxite, phosphate, fertilizers and steel products. The average age of the vessels in its drybulk fleet is 8.3 years. In January 2009, the Company disposed off three Capesize newbuildings..

Confidence Margins

Strong resistance $6.44 (+71%)

Light resistance $5.12 (+36%)

Light support $3.56 (-5%)

Strong support $3.28 (-13%)

Recommendation

DryShips is a company that has it's stock subject to a lot of volatility. It however presents an impressive buying opportunity at current price. First, profitability is coming back to the company even if capital expenditures are rapidly increasing. There is also the upcoming spin-off of the Ocean Rig subsidiary that will greatly increase shareholder value while reducing the debt load of the holding company. Last time this company showed up on our screen list, it provided a 20% return to the cautious investor.

Entry strategy

For the cautious investor:

Buy the stock for 4$ or less.

For the risk-taking trader:

The September 2011 4$ out-of-the-money call option contract seems to be the right position to take, they can be acquired for about 33$ per contract.

Exit Strategy

For the cautious investor:

Sell when the stock reaches 5$, or keep it until 6$ if you are more bullish in your own analysis.

For the risk-taking trader:

The contracts should be kept until the underlying reaches 5$. This should provide a very interesting return if the underlying reaches the target price as the contracts will get in the money.

Q4 Performance Review (DRYS, DSPG, DUK, ITRI, JOEZ, KLIC, MSFT, NDN, OCLR)

Since performance evaluation is an important part of investment analysis. Here is how our recommendations performed since they were issued, ordered by return for the cautious investor if they had been held until market closes at the end of 2010:

OCLR:   + 52.6% 

DRYS:   + 20.1% 

DSPG:   + 11.1% 

MSFT:   + 8.1% 

ITRI:      +1.3% 

DUK:     +0.9% 

KLIC:     -1.8% 

NDN:     -2.4% 

JOEZ:     -4.3%  

Some of the picks returned modest performance, but they showcased more impressive returns after the end of the quarter. Stay posted for forthcoming recommendations for Q1 2011.

Dryships Inc. (NASDAQ: DRYS) Q4 2010 Analysis

Recent price: 4.57$

P/E Ratio: 24.05

3 month Target Price: 5.70$

Company Description

Dryships is a Marshall Islands registered company that was formed in September 2004. Their business strategy is focused on building and maintaining enduring relationships with charterers of drybulk carriers and providing reliable seaborne transportation services at competitive cost. They seek to create shareholder value by acquiring and operating second hand drybulk carriers across the size spectrum, including large (Capesize), medium (Panamax) and small (Handymax and Handysize), and employing them in a combination of "spot charter", and "period time charter" contracts and pools.

Mr. George Economou, the company’s Chief Executive Officer, has been active in shipping since 1976 and formed the Company's related technical and commercial ship-management company, Cardiff Marine Inc. in 1991. Cardiff has established a reputation in the international drybulk shipping industry for operating and maintaining a fleet with high standards of performance, reliability and safety.

Confidence Margins And Potential Profit

Strong resistance $5.70 (+25%)

Light resistance $5.00 (+9%)

Light support $4.10 (-10%)

Strong support $3.30 (-28%)

Recommendation

The company is currently close to being oversold, with the RSI index lowering and getting close to 30 and the MACD coming back to 0. The next big move in the stock price will be bullish.

Entry and Exit Strategy

For the cautious investor:

Buy the stock for 4.50$ or less.

For the risk-taking trader:

Buy 6$ December out of the money call options for about 10$ a contract. If the stock goes under the light resistance level, you might want to consider closing the position if you cannot bear to have your position temporarily getting to your strong support.

For the cautious investor:

Sell when the stock reaches 5$, due to the strong resistance or keep it until about 5.70$ if you are very bullish.

For the risk-taking trader:

Major price movements should happen when the company announces the awarding of a Rig drilling contract, or after the release of their quarterly report.

If the resulting price is satisfying, sell the call options as soon as either of those events happens.