Analyst: Buy the Dip on This Luxury Retailer

D.A. Davidson doesn't see tariffs impacting GOOS

Managing Editor
Aug 6, 2019 at 9:52 AM
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The shares of Canada Goose Holdings Inc (NYSE:GOOS) are up 2.9% to trade at $43.46 today, after D.A. Davidson called the retail stock's recent pullback a buying opportunity. The analyst pointed out that GOOS has "minimal exposure to U.S. tariffs on its sourcing from China," and that investors aren't "recognizing that the company is likely buying into demand by ramping up in-house production." 

You can forgive investors for still harboring concerns. Canada Goose stock gapped sharply lower in early June after a dismal quarterly report, culminating in an annual bottom of $31.67 on June 6. A subsequent rally from here was stymied at the shares' 160-day moving average. And despite GOOS' positive price action today, it still is staring up at its year-to-date breakeven level, an area breached on Aug. 1 when President Donald Trump announced additional tariffs on Chinese goods. 

If the selling is indeed overdone, it could spell trouble for the security's horde of short sellers. Short interest increased by 24% in the two most recent reporting periods to a record high 10.47 million shares. This accounts for 18% of GOOS' total available float, and 6 days' worth of pent-up buying power, at its average pace of trading.

In the options pits, puts have been all the rage. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), GOOS' 10-day put/call volume ratio of 1.83 ranks 1 percentage point from an annual high. This shows the rate of put buying relative to call buying has been accelerated the past two weeks.

Echoing this, the stock's Schaeffer's put/call open interest ratio (SOIR) of 1.29 ranks in the 87th percentile of its annual range, signaling an unusual put-skew among short-term traders. A shift in sentiment among options traders could certainly buoy the shares.

 

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