Redwire plunged after a wider loss in FY21– Should investors snap the stock?

on Apr 5, 2022
  • Redwire's FY21 loss widened to $61.5 million.
  • The stock fell by 26% post-earnings.
  • The stock is a buy around or above $5.

Shares of Redwire Corporation (NYSE:RDW) plunged 26% on the first day of April after widening its loss in FY21. The loss of $61.5 million was higher by $47.2 million from the previous year. Nonetheless, analyzing Redwire’s financial results further indicates that it has strong fundamentals that could catapult it to growth.

Redwire could have posted a net profit without the SG&A expenses, which increased by $65.6 million to $78.7 million. Other costs also rose, with some related to the expenses of taking the company public.

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The company posted a robust $96.8 million revenue in FY21, increasing 237%. The earnings were emphasized by strong guidance, with the company expecting revenue of between $165 million and $195 million in FY22. What made the stock fall?

Investors might just be cautious about the space infrastructure company and could have expected it to turn in lower losses, if not profits. However, the company has a robust growth potential and fundamentals to take it to the next level.

What next – RDW bottomed at $5?

Source – TradingView

Technical analysis shows that Redwire stock has established a strong support zone at $5. The stock was on an uptrend before the FY21 results, jumping from an oversold level of $5. It met resistance at $8.8 before crashing following the earnings results. The stock is now finding a new bullish momentum.

Concluding thoughts

Market sentiment and investor concerns are critical drivers of stock performance. At the moment, sentiment is against RDW after wider losses. Still, there is a strong bull case for the stock above $5, where it found a bottom.

The stock will face resistance at around 8. Investors can catch the $5 bottom and exit at the resistance zone. The stock could face difficulties reaching the former highs unless future earnings come positive.

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