Goldman Eyes Record Highs for This Retail Stock

Goldman Sachs initiated coverage on VFC with a "buy" rating

by Patrick Martin

Published on May 17, 2019 at 12:15 PM

Several retail names step into the earnings confessional next week, including VF Corp (NYSE:VFC), set to report on Wednesday, May 22, before the open. Ahead of the event, Goldman Sachs initiated coverage on the North Face parent with a "buy" rating and $97 price target, home to its Aug. 10 record high. The analyst in coverage sees VFC as a higher growth business with attractive categories once the company spins off Jeans and VF Outlet business, expected to complete on May 23.

VF Corp stock has been unable to take advantage of the bull note, at last check down 0.3% to trade at $90.96. The $96 level has served as a stiff ceiling in the past month, but a pullback last week found support at the shares' 50-day moving average. Year-to-date, VFC is up 27.2%.

Today's bull note reflects the broader analyst picture. Of the 15 brokerages covering the equity, 11 rate it a "buy" or better, with zero "sells" on the books. However, the stock's average 12-month price target of $97.68 is a slim 7% premium to last night's closing perch of $91.30, indicating the door is wide open for price-target hikes.

Daily Stock Chart VFC

Looking at VF Corp's earnings history, the stock has closed higher the day after reporting in four of the last eight quarters -- including a 12.4% jump in January. On average, the shares have moved 6.6% in the session subsequent to earnings, regardless of direction, going back to years, with the options market pricing in a larger-than-usual 8% swing this time around.

VFC options traders have been loading up on calls. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the equity's 10-day call/put volume ratio sits at 5.19. Not only does this indicate calls outnumber puts by a more than five-to-one ratio, but that ratio ranks in the 72nd annual percentile, meaning calls have been bought to open over puts at a quicker-than-usual clip.

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