Kohl's Stock Pumps The Brakes After Bear Note

Citigroup also issued a price-target hike to $75

Managing Editor
Jun 14, 2018 at 10:25 AM
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Although retail sales numbers came in higher than expected this morning, Kohl's Corporation (NYSE:KSS) is down 3.2% to trade at $73.31, after Citigroup downgraded the stock to "neutral" from "buy," while lifting its price target to $75 from $71. The analyst in coverage said the stock's upside reaction to the company's recent "underwhelming" earnings report and increased expectations have created a more balanced risk/reward ratio. However, they also noted that KSS was better positioned than its mall-based peers J C Penney (JCP) and Macy's (M). 

Looking at the charts, Kohl's stock had been carving out a path of higher highs since mid-May, and topped out at an all-time peak of $79.92 on Tuesday. However, the equity is now on track to snap its four-week winning streak -- the longest stretch since January -- and is headed for its first close below the 10-day moving average since May 23.

On the sentiment front, analysts are mixed on the retail name. While eight of the brokerages covering KSS rate it a "strong buy," nine maintain a "hold" or "strong sell" recommendation. Furthermore, KSS' consensus 12-month price target of $75.80 sits right near yesterday's close of $75.72. 

In the options pits, though, puts have been bought to open relative to calls at a quicker-than-usual clip. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the equity's 10-day put/call volume ratio of 1.25 ranks in the elevated 87th annual percentile. Given that Kohl's has added 38% in 2018, some of this recent put buying could be at the hands of shareholders initiating an options hedge against any downside risk.

Whatever the motive, those purchasing premium on KSS stock's short-term options are in luck. The equity's Schaeffer's Volatility Index (SVI) of 34% ranks in the 11th annual percentile, meaning low volatility expectations are being priced into near-term contracts.


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