Schaeffer's Trading Floor Blog

Why Michael Kors Holdings Ltd (KORS) is a Bearish Favorite

KORS has gotten battered on the charts this week, thanks to negative analyst attention

by 7/16/2014 10:16 AM
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It's been a brutal week for Michael Kors Holdings Ltd (NYSE:KORS), which has shed 11.4% since last Friday's close to trade at $78.70. The swoon results from a raft of bearish brokerage attention, following the handbag maker's lackluster June sales data. Specifically, KORS received several price-target cuts yesterday, as well as a downgrade to "market perform" from "outperform" at William Blair this morning. Looking elsewhere, the retailer doesn't have many supporters in the options pits, either.

Specifically, during the past two weeks at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), KORS has racked up a put/call volume ratio of 1.43. Not only does this ratio indicate long puts outnumber long calls, but it also ranks in the 84th percentile of its annual range. In other words, traders have picked up puts (relative to calls) at a faster rate just 16% of the time, looking back 12 months.

Short-term speculators have been showing a strong put-bias of late, as well. In fact, KORS' Schaeffer's put/call open interest ratio (SOIR) of 1.42 outstrips 97% of all other comparable readings from the past year, with put open interest outweighing call open interest among options expiring in the next three months.

This isn't surprising, either, given the stock's technical struggles. Beyond what the shares have experienced this week, Michael Kors Holdings Ltd (NYSE:KORS) is a longer-term laggard -- underperforming the broader S&P 500 Index (SPX) by more than 12 percentage points during the past two months, and sitting in the red on a year-to-date basis. If this technical trajectory continues, additional bearish notes could be forthcoming, as 10 out of 16 covering analysts still maintain "buy" or better ratings on the equity. Plus, KORS' consensus 12-month price target remains perched at a lofty $107 -- territory never explored by the stock.

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