Goldman, Traders Go Bullish on DKS Stock

Most of Wall Street remains very bearish on DKS shares

by Josh Selway

Published on Oct 25, 2019 at 10:27 AM
Updated on Jun 24, 2020 at 10:16 AM

Dick's Sporting Goods, Inc. (NYSE:DKS) is trading up 1.5% this morning at $40.50, after Goldman Sachs upgraded its rating on the retailer to "buy" and set a $45 price target, which represents two-year-high territory for the shares. This comes as the options market has also been changing its tune on DKS, with call buying picking up in recent days.

Specifically, demand for long calls over puts has surged in recent sessions, with the 10-day call/put volume ratio at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) going from 0.69 on Monday, to a current reading of 3.71. That ratio ranks in the 83rd annual percentile, showing such a push for long calls over puts is rare for DKS.

From a broader standpoint, the sentiment picture is still very bearish on DKS. Despite a 15% decline in the past two reporting periods, short interest still represents 30% of the equity's float. As such, the recent surge in call buying -- especially at out-of-the-money strikes -- could be attributable to lingering shorts seeking an options hedge.

Most analysts have remained skeptical, too. By the numbers, just two of the 13 brokerage firms in coverage recommended buying Dick's Sporting Goods, heading into today, so more upgrades are certainly a possibility for a stock that's outperformed the S&P 500 Index (SPX) by more than 12 percentage points in the past three months.


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