Could Capri Holdings' Bullish Run Be Coming To an End?

Shares of Versace’s parent company are up almost 300%

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Capri Holdings Limited (NYSE:CPRI) is a multinational luxury fashion company that includes the brands Versace, Jimmy Choo, and Michael Kors. CPRI has increased 343% over the past 12 months and quadrupled from its record low of $11.61. Additionally, shares of Capri stock have grown about 41% year-to-date and are just trading 2% down from their two-year high of $59.35.

Capri Holdings recently announced that it plans to report its fiscal fourth-quarter earnings before the open on Wednesday, May 26. Looking back on recent history, Capri Holdings has outperformed Wall Street's expectations on three of its last four earnings reports.

For the fiscal fourth quarter 2020, Capri Holdings missed analyst estimates by a margin of $0.03 and reported an earnings per share (EPS) of $0.11. For the fiscal first quarter of 2021, CPRI posted a decrease in earnings down to -$1.04 per share, but still managed to beat expectations by a margin of $0.07. For the fiscal second quarter of 2021, Capri Holdings stock increased in earnings per share, rising to $0.90 and outperforming estimates by a significant margin of $0.86. For the fiscal third quarter of 2021, Capri Holdings reported an EPS of $1.65 and beat expectations by a margin of $0.64. 

Now Capri Holdings stock's forward price-earnings stands at a promising 16.34. Fundamentally, CPRI is still looking like a decent value stock, even though it has grown so significantly over the past year. However, investors should be aware that the company carries $3.58 billion in total debt and just $229 million in cash on its balance sheet.

Meanwhile, a penchant for calls is evident from the last 10 weeks, per CPRI' 50-day call/put volume ratio of 3.64 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). This ratio stands higher than 81% of readings from the past year, indicating a much stronger-than-usual preference for calls during this time. However, should these bullish bets begin to unwind, it could sent the security lower.


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