Luxury Retail Stock Locks In Bull Notes

There is plenty of room for more analyst upgrades as well

Deputy Editor
Sep 21, 2020 at 11:20 AM
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Capri Holdings Ltd (NASDAQ:CPRI) is in focus today after receiving an upgrade from Morgan Stanley to "overweight" from "equal weight." The firm cited global retail's faster-than-expected recovery, also observing that Versace's latest results underscore its long-term revenue and margin potential. Meanwhile, Piper Sandler also lifted its price target to $21 from $15. As the broader market slips, CPRI was last seen down 0.4% at $20.75.

Rejected by the $23 area last week for the second time since its March lows, the equity is now struggling to retake its 200-day moving average, briefly toppling the trendline last week for the first time since late January. Struggling just below this level today, however, CPRI is down 46% year-to-date. 

Coming into today, 13 of the 17 analysts in coverage carried a "hold" on CPRI, with the remaining four at "strong buy" ratings. There is plenty of room for more upgrades/price-target hikes as well, seeing as the 12-month consensus price target of $19.55 still at a 5.7% discount to current levels. 

Though short interest is down 14.5% during the last two reporting periods, there is still plenty of pessimism to be unwound that could push CPRI higher. The 12.87 million shares sold short account for 8.8% of Capri stock's available float. In other words, it would take nearly four days to buy back these bearish bets at CPRI's average pace of trading.

Calls have gained popularity in the options pits. The stock's 10-day call/put volume ratio of 9.63 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) stands higher than 88% of readings from the past year. Options look like a decent way to go when weighing in on the stock, as it is currently seeing attractively priced premiums. CPRI's Schaeffer's Volatility Index (SVI) of 70% sits higher than just 17% of readings in its annual range, suggesting short-term options are pricing in relatively low volatility expectations.


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