Low Expectations Priced Into Outperforming Tiffany Stock Ahead of Earnings

TIF has enjoyed steady support atop its 200-day moving average

Managing Editor
Nov 28, 2017 at 11:26 AM
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Luxury jewelry maker Tiffany & Co. (NYSE:TIF) is joining its fellow retail stocks in the spotlight today, as Wall Street digests Cyber Monday sales that are estimated to be a record high $6.59 billion. This comes just ahead of TIF's third-quarter earnings report, which is set to released before tomorrow's open. Tiffany stock was trading down 0.8% at $92.56 at last check, but if past is precedent, the shares could be headed higher tomorrow. Below, we will take a look at the pre-earnings sentiment surrounding Tiffany & Co stock both in and out of the options pits.

Taking a quick look at the charts, TIF is up more than 20% on the year, with recent pullbacks contained by its rising 200-day moving average. The stock has historically performed well in the session after earnings, posting a next-day gain in six of the last eight quarters. On average, TIF shares have swung 3.6% in the session subsequent to earnings, with the options market pricing in a bigger 8.9% move for tomorrow's trading.

In the options pits, speculators have taken a seemingly bearish tone in recent weeks. The security's Schaeffer's put/call open interest ratio (SOIR) of 1.16 ranks in the 86th percentile of its annual range, pointing toward an unusual put-skew among near-term options traders. An unwinding of some of the hedges related to these bets could create tailwinds for TIF.

Drilling down, the weekly 12/1 89-strike put is TIF's top open interest position, with 4,689 contracts currently outstanding. Data from Trade-Alert indicates a number of new positions were purchased here yesterday, meaning traders are betting on TIF sinking below $89 -- into territory not seen since late September -- by expiration at this Friday's close.

Outside of the options pits, short interest rose 17.4% in the past two reporting periods to 4.59 million shares, or 4.7 times the stock's average daily pace of trading. Another positive earnings reaction could spark a wave of short covering, which could help boost the shares higher. There's room for a round of upgrades, too, considering 10 of 18 analysts covering TIF maintain a tepid "hold" rating.

 

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