Hanesbrands Stock Slammed With Bear Notes After Sell-Off

Options traders have been extremely call-heavy in recent weeks toward HBI

Managing Editor
Aug 2, 2018 at 9:50 AM
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Underwear stock Hanesbrands Inc. (NYSE:HBI) is trading down 0.3% at $17.91 this morning, after receiving a round of bearish brokerage notes. This comes in reaction to  following yesterday's negative earnings reaction, which sent the shares plummeting to their lowest level since mid-May.

Taking a closer look, Hanesbrands stock plunged more than 19% after the company posted a second-quarter profit miss. Ahead of this gap, HBI had been churning between $21.50 and $22.50 since late June, just below its year-to-date highs from January. Now, the stock is staring at a year-over-year deficit of 14.4%.

Against this backdrop, HBI received a downgrade at Barclays to "equal weight" from "overweight" and a price-target cut to $19 from $22. The firm cited a lack of near-term positive catalysts as the reason behind the bear note. Additionally, Instinet slashed its price target on HBI to $18 from $20, and Credit Suisse lowered its target to $19 from $21.

Analysts have already been pessimistic toward Hanesbrands stock. Of the 13 brokerage firms covering HBI, eight sport a tepid "hold" rating. However, its worth noting that the stock's average 12-month price target stands at $21.64 -- a nearly 20% premium to current levels -- meaning more price-target cuts could come down the pike.

On the flip side, options traders have been extremely bullish in recent weeks. This is per data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), which shows HBI's 10-day call/put volume ratio at 17.93, ranking in the lofty 98th percentile of its annual range. In other words, calls have been bought over puts at a faster-than-usual pace.

Echoing this, HBI's Schaeffer's put/call open interest ratio (SOIR) comes in at 0.42 and ranks in the lowest percentile of its annual range. This indicates near-term call open interest outweighs put open interest by a wider-than-usual margin at the moment. 

Some of this call activity could be a result of shorts hedging against any upside risk. While short interest on Hanesbrands stock declined more than 3% during the most recent reporting period, it still represents 15.6% of the stock's total available float.

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