Foot Locker Stock Laces Up for Earnings

Foot Locker stock has had a mixed post-earnings response in the past

Digital Content Manager
Nov 19, 2020 at 2:53 PM
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The shares of Foot Locker, Inc. (NYSE:FL) are up 1.7% at $40.61 this afternoon, but have stalled out around the $42 area, which was a pre-pandemic ceiling back in February. The positive price action comes ahead of the company's third-quarter earnings report, due out tomorrow before the open on Friday, Nov. 20. Below, we will take a look at how the stock has performed on the charts of late, and explore some of the options activity surrounding FL ahead of the event.  

Foot Locker shares have been chopping higher on the charts since April after dropping to a March 23, nine-year low or $17.46. The 60-day moving average emerged as support in August, and was able to contain the stock's pullback this month as it fights overhead pressure at the $41 mark. In the last three months, the security has gained 49.3%.


A look at the equity's history of post-earnings reactions over the past two years shows a mixed response. During its last eight reports, half of these next-day sessions were higher, while the other half was lower, including a 14.9% pop this time in 2018. The security averaged a post-earnings swing of 9.6% the last eight quarters, regardless of direction. This time around, the options market is pricing in a larger-than-usual move of 11.9%.

Analysts are split toward the equity, leaving plenty of room for upgrades and price-target hikes going forward should the retailer turn in an encouraging quarterly report. Of the 19 in coverage, 10 carry a tepid "hold" rating, while nine say "buy" or better. Plus, the stock's 12-month consensus price target of $38.67 is a 4.7% discount to current levels.

Shorts are already hitting the exits, though there is still plenty of pessimism left to be unwound, which could also serve as a tailwind for FL. Short interest dropped 31.4% in the most recent reporting period, but the 6.28 million shares sold short still account for 6.5% of the stock's available float.

Short-term traders are leaning bearish in the options pits. This is per the stock's Schaeffer's put/call open interest ratio (SOIR) of 1.07, which sits higher than 77% of readings from the past year. In other words, short-term option traders have rarely been more put-biased.


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