Tapestry Stock Slipping Despite Upbeat Earnings Report

Options traders are eyeing a short-term ceiling after the report

Deputy Editor
Aug 13, 2020 at 10:51 AM
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The shares of Tapestry Inc (NYSE:TPR) are down 2.6%, last seen trading at $15.17, after the Coach and Kate Spade's parent's fiscal fourth-quarter losses came in lower than Wall Street anticipated. Revenue was well above estimates, with e-commerce sales during the coronavirus pandemic giving the company a nifty boost amid global store closures. Despite the encouraging top-line numbers, what has triggered today's price action is a downbeat sales outlook for 2021.

A series of bear gaps beginning in late February sent Tapestry stock to an 11-year low of $10.18 on April 2. And while the shares have tacked on 22% in the last three months, they remain down 44% in 2020.

Analysts have yet to chime in on the revenue beat, though the majority of the brokerage bunch is already lukewarm on TPR. Of the 22 covering the stock, 15 call it a tepid "hold.". However, the consensus 12-month price target of $18.84 is a 22.7% premium to last night's close, suggesting a flurry of bear notes could come through and weigh on the equity.

In the options pits, calls rule the roost. In the past 10 days, 5,651 calls have exchanged hands on the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), compared to a meager 1,773 puts. 

Today is more of the same. At last check, over 3,000 TPR calls have changed hands, triple the average intraday amount and number of puts traded. Most of this attention is directed toward the weekly 8/14 16-strike call, where new positions are being sold to open. Sellers of these call are banking on the $16 level to serve as a ceiling by tomorrow, when the contracts expire.


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