Sentiment Turns Sour Ahead of ULTA Earnings

Puts are outnumbering calls today in ULTA's options pits

Deputy Editor
Mar 12, 2020 at 2:29 PM
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Ulta Beauty Inc (NASDAQ:ULTA) has been no stranger to the broadmarket selloff. The stock hit a four-year low of $190.83 earlier today, and is now down 6.30% to trade at $206.77, right ahead of its fourth-quarter earnings report, due out after the close this evening. Despite this dip, there's still plenty of bullish sentiment surrounding the cosmetics retailer, though today's options pits are indicate a heightened interest in bearish bets. 

While volume is still relatively light, puts more popular than calls today, and running at a slightly quicker clip than usual, with 3,421 puts across the tape so far, compared to just 2,214 calls. The weekly 3/13 200-strike put is the most popular, while positions are also being sold to open at the March 130 put. 

Typically, bulls rule the roost, per ULTA's 50-day call/put volume ratio of 1.78 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), which sits in the slightly elevated 66th percentile of its annual range. 

Analyst sentiment, however, has been divided, which could lead to more downgrades should ULTA continue to tumble. Among the brokerage bunch, 11 in coverage consider the stock a "strong buy," while 10 call it a "hold" and not a single "sell" rating to be found. Meanwhile, the consensus 12-month price target of $285 is a solid 37.8% premium to current levels. 

Taking a look at ULTA's last eight earnings reports shows that the majority of its next-day returns to be positive, save for a glaring 29.6% post earnings plummet in August of last year and a 13.1% drop the session following its January 2018 quarterly announcement. Regardless of direction, ULTA has averaged a 9.8% next day swing looking at those last eight reports. This time around the options pits are pricing in a much bigger move at 20.4%. 

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