The options market is pricing in a giant earnings move for UAA
Under Armour Inc (NYSE:UAA) stock jumped 27.7% the day after earnings back in October, part of its streak of four consecutive quarters of post-earnings gains, including a 17.4% pop this quarter last year. The shares will try to keep the ball rolling following the company's earnings release tomorrow morning, and the options market is predicting another huge swing, pricing in a 21% move for UAA stock.
Today the equity is trading up 0.6% at $20.87, holding a recent foothold atop the 50-day and 200-day moving averages, also near the site of its November low and mid-December bear gap. For reference, a 21% move to the upside would put the athletic apparel specialist around $25.30, past its 52-week high of $24.96 from Dec. 3. Such a move lower would have the stock right at $16.50, the site of its notable multi-month low from December.
Under Armour's Schaeffer's put/call open interest ratio (SOIR) comes in at 0.59, showing a strong tilt to calls over puts among near-term options traders. More telling still, this reading ranks in the lowest annual percentile, showing that such a heavy call-skew for options expiring within three months is extremely unusual.
Looking at some of the recent activity from speculators, the weekly 3/1 26.50-strike call saw the largest increase in open interest during the past 10 days, followed by the March 22.50 call and the February 21 call. Anyone who bought to open these contracts would be betting on UAA shares rising in the coming weeks.
Lastly, we'd note that most brokerage firms are still bearish on the equity, with 18 of 23 handing out "hold," "sell," or "strong sell" recommendations, and the average 12-month price target of $21.04 is right in line with current levels. Some analysts have begun to come around on Under Armour, however, and another strong earnings performance could spark even more bullish attention.