Urban Outfitters Stock Eyes 8th Straight Gain on Analyst Bull Note

Options traders have been bullish toward URBN shares

Emma Duncan
Apr 3, 2019 at 10:12 AM
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Clothing giant Urban Outfitters, Inc. (NASDAQ:URBN) is moving higher this morning, after scoring an impressive bull note out of D.A. Davidson. Specifically, the firm upgraded its position to "buy" from "neutral," and tacked on $6 to its $30 price target. The brokerage firm cited strengthening fundamentals, expansion opportunities, and strong leadership for the upgrade, among other reasons. In response, URBN is up 3.6% at $31.77, at last check, but the retail stock is running into a familiar area of resistance.

Urban Outfitters stock has struggled on the charts since hitting its August 2018 peak of $52.50, touching an annual low of $27.60 as recently as March 25. While the equity has powered higher since that low -- on pace for an eighth straight daily gain -- it's now within one standard deviation of its 60-day moving average, which has capped breakout attempts over the past year.

Over the past two years, there have been four other times when URBN came within striking distance of its 60-day after a lengthy stretch below the trendline. After those technical signals, the stock was lower three weeks later every time, averaging a loss of 8.82%, per data from Schaeffer's Senior Quantitative Analyst Rocky White.

Despite its underperformance in 2019, options traders have been leaning optimistic toward the retailer. Data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows the security with a 10-day call/put volume ratio of 5.78, ranking just 6 percentage points from an annual high. In other words, calls have been bought to open over puts at a faster-than-usual clip during the past two weeks of trading.

Coming into today, 14 of 18 covering brokerage firms carried a "hold" recommendation, with only four "buy" or "strong buys" on the books. This would suggest that today's upgrade is a rarity for the stock. Meanwhile, D.A. Davidson's new $36 price target is in line with the consensus 12-month target of $36.19.

 


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