True Religion: Analyst Comments Perfect Catalyst for a Short Squeeze

There was no better time for some positive analyst commentary if you are on the long side of the True Religion Apparel Inc. (TRLG) trade with the stock close to breaking out above multi-year resistance and looking to move above its 52-week high of $24.76. According to the Associated Press, Morgan Keegan analyst Brad Stephens believes the jean maker’s upcoming presentation of its fiscal 2012 business plan in June will highlight the company’s growth potential and is a positive for the stock.

He’s a bit presumptuous in saying that the company can earn at least $4.70 in fiscal 2013 - that’s extremely forward looking, but he did raise his fiscal 2009 earnings per share estimate to $1.90, something more bankable. In a note to clients, Stephens advises both long-term and short-term investors to aggressively accumulate shares at current levels.

The trading action suggests that’s what investors did for the most part on Thursday, when the stock was up by $1.18, or 5.19%, to $23.92. With a focus on rising earnings estimates, the upcoming presentation of a long-term growth plan should underscore the fact that the stock trades at a low multiple relative to its growth prospects and is a perfect catalyst for a short squeeze as investors bid up the stock.

The short interest remains at a twelve month high with 10.22 million shares short, nearly two thirds of the publicly traded float, but it’s difficult to believe the bears can continue to sustain a grip on the stock given the fundamental picture.