Kroger Stock Picks Up Steam Ahead of Earnings

Morgan Stanley already hiked its price target to $28

Deputy Editor
Mar 4, 2020 at 3:29 PM
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With fourth-quarter earnings due out before the open tomorrow, March 4, the shares of grocery store chain Kroger Co (NYSE:KR) are climbing higher, up up 3.4% at $30.33 at last check. This is due in part to Morgan Stanley's price target hike by $1 to $28 -- a slight discount to current levels. Today's pop places KR right below its Feb. 18 annual closing high of $30.72. 

Looking closer at the charts, the equity has been trading in a series of higher highs since a post-earnings bull gap in early November, with legs of support forming at the $26.50- $27 region and the 100-day moving average. For the year, KR is up nearly 4.6%, though some pressure appears to be forming at it's 12-month peak near the $30 level. 

KR Chart March 4

Among the brokerage bunch, there's plenty of room for upgrades. The consensus 12-month price target of $28.67 is a roughly 5.6% discount to current levels, and 10 of the 16 analysts covering the stock consider it a "hold" or worse. 

The options pits have taken a more optimistic stance. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) KR sports a 50-day call/put volume ratio of 2.54. This ratio sits higher than 73% of all other readings from the past year, suggesting long calls have been picked up at a slightly quicker-than-usual clip. 

Today, however, it looks like options bears' interest has been piqued. While the 6,539 calls that have exchanged hands so far still outnumber the 4,311 puts traded on an overall basis, these bearish bets are running double to what's typically seen at this point. The weekly 3/6 29.50-strike is the most popular put contract with positions being opened here. On the call side the April 35 call and the weekly 3/6 32-strike contracts are seeing plenty of attention, with positions being opened at both.

Looking back at KR's past post-earnings moves, the stock saw negative returns during five of the last eight sessions, including a 10% dip last March, and a 12.4% drop the preceding year. This time around the options pits are pricing in a 9.8% next-day swing, regardless of direction, slightly bigger than the 6.3% post-earnings move averaged during the past two years.

 


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