KKR Stock Scores Price-Target Hike After Buy Signal

KKR just sent up a buy signal, and Oppenheimer upped its forecast for the stock

Managing Editor
Jul 18, 2018 at 3:16 PM
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Shares of global investment firm KKR & Co Inc (NYSE:KKR) are moving higher this afternoon, after earlier receiving a price-target hike to $35 from $29 at Oppenheimer -- in uncharted territory. Separately, short seller Jim Chanos said today he thinks KKR might back out of its planned $10 billion deal for Envision Healthcare (EVHC).

KKR stock has been in a long-term uptrend, with pullbacks contained by its 200-day and 320-day moving averages. The shares notched an all-time intraday high of $27.56 last Monday, and were last seen 1.2% higher to trade at $27.25 -- set for a record closing high. In fact, KKR just flashed a low-volatility/high-stock price buy signal, according to data from Schaeffer's Senior Quantitative Analyst Rocky White.

Daily Chart of KKR With 200 and 320MA

Looking at options data, short-term traders are more call-skewed than usual, with KKR's Schaeffer's put/call open interest ratio (SOIR) of 0.24 ranking in the 5th annual percentile. This indicates that near-term call open interest outweighs put open interest by a wider-than-usual margin right now. The in-the-money July 25 call is home to peak call open interest in the front-month series, with nearly 12,000 contracts outstanding, and data from the major options exchanges points to significant buy-to-open activity.

Oppenheimer is far from the only analyst sporting an optimistic outlook toward KKR stock. Of the seven brokerage firms following the equity, five sport "strong buy" recommendations. What's more, KKR's average 12-month price target now stands at $30.54, up from $25.69 three months ago.
 
Looking ahead, it's worth noting that KKR is scheduled to report earnings next Thursday, July 26. The stock has averaged a fairly modest 2.4% single-day price move after its last eight earnings reports, but KKR's short-term options are currently pricing in a 4.2% swing.
 
With this event on the horizon, traders looking to join the equity's bullish bandwagon may want to consider call options dated no earlier than mid-August, where at-the-money implied volatility is currently more than 5 percentage points lower than next week's 7/27 expiration series. In fact, as we noted yesterday, KKR's monthly August options are pricing in some of the lowest volatility expectations of the past year, as based on its Schaeffer's Volatility Index (SVI) ranking.
 

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