Checking in with Gap Stock Ahead of Earnings

Options traders are pricing in a hefty post-earnings swing

Deputy Editor
Mar 8, 2023 at 3:15 PM
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Clothing retailer Gap Inc (NYSE:GPS) will step into the earnings confessional after the close on Thursday, March 9. Wall Street expects the company to report fourth-quarter losses of 46 cents per share, alongside $4.36 billion in revenue. 

Gap stock was last seen 0.8% lower to trade at $12.01 ahead of the event. The shares have moved erratically after earnings over the past two years. In fact, of these eight next-day sessions, the stock moved higher four times, lower three times, and was unchanged once.

Following its last report, the retailer posted a 7.6% pop after beating analysts' earning expectations. Options traders are pricing in a 14.2% swing for the security this time around, which is more than double the 6.4% move Gap stock averaged following its last eight reports, regardless of direction. 

On the charts, GPS is pulling back near the $12 level. The equity's 140-day moving average is managing to provide support near the $11.70 area, too. Year-to-date, Gap stock maintains a nearly 6.5% lead.

GPS Chart March 82023

Ahead of the event, analysts are pessimistic. In fact, of the 14 in coverage, just two recommend a "strong buy." The shares sold short account for 18.1% of Gap stock's total available float, or nearly five days' worth of trading at its average pace of trading.

There's plenty of optimism in the options pits, where calls are handily outpacing puts. In fact, GPS sports a 50-day call/put volume ratio of 2.12 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). This ratio ranks in the 84th percentile of its annual range, which suggests a healthier-than-usual appetite for calls at the moment.



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