DECK Soars to Multi-Year High After Earnings Beat

Deckers shares touched a four-year high earlier today, sending some shorts running for the exits

Managing Editor
Feb 2, 2018 at 10:50 AM
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Deckers Outdoor Corp (NYSE:DECK) is up 5.7% to trade at $92.26 this morning, after the UGG maker delivered fiscal third-quarter earnings and sales that beat expectations. The company cited tax reform as a contributor to the earnings beat. As a result, no fewer than seven brokerage firms chimed in with price-target hikes, including Canaccord Genuity's hike to $110 -- a 19% premium to the stock's current perch.

The news had DECK stock soaring out of the gate, nabbing an early three-year high of $98.62, and on pace for its fourth straight weekly win. The shares have added an impressive 98% year-over-year, and today's rally has them trading well north of reliable support at their 20-day moving average.

Despite DECK's solid technicals -- and today's wave of target hikes -- most analysts remain on the sidelines. Of the 12 brokerages covering the stock, nine rate it a "hold" or "strong sell," leaving room for future upgrades.

A short squeeze is likely providing tailwinds for DECK today. Short interest has increased by nearly 40% since August, and the 4.35 million shares sold short represents nearly 14% of the stock's total available float. This accounts for a whopping 10 days' worth of pent-up buying demand, at the equity's average daily volume.

In the weeks leading up to earnings, options traders were targeting DECK calls. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), DECK's 10-day call/put volume ratio is 2.86.

Not only does this indicate that calls bought to open have nearly tripled puts in the past two weeks, but this ratio ranks in the 84th percentile of its annual range -- pointing to a healthier-than-usual appetite for calls over puts in recent weeks. Given the stock's strong price action and heavy level of short interest, some of these calls may have been purchased as pre-event hedges by uneasy short sellers.

 

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