RH Stock Surges on Cowen Upgrade, Price-Target Hike

The equity is already up over 121% year-over-year

Digital Content Manager
Sep 29, 2020 at 12:24 PM
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The shares of RH (NYSE:RH) are up 5.1% at $379.10 at last check, after the home-furnishings company received an upgrade from Cowen and Company to "outperform" from "market perform" this morning, as well as a price-target hike to $435 from $370. In addition to seeing upside in the company's long-term revenue targets, the analyst in coverage said the stock is in the "earlier innings" of a multi-year transformation, and should benefit from tailwinds as shoppers increase investments in their homes.

On the charts, the equity has experienced overwhelming growth over the past few months, more than quadrupling off its mid-March lows near the $74 level. And while shares have been cooling off from a bear gap that pushed the equity to an all-time-high of $410.49 on Sept. 10, RH had been breaking records on a monthly basis before then, with support from the 40-day moving average. Year-over-year, the retail stock sports an impressive 121.1% lead.


Analysts were already mostly optimistic towards the equity coming into today, with nine of the 13 in question sporting a "strong buy" rating, and the remaining four carrying a tepid "hold." Meanwhile, the 12-month consensus target price of $392.77 is a 3.9% premium to current levels.

In the options pits, traders are more pessimistic, with puts popular. This is per the stock's Schaeffer's put/call open interest ratio (SOIR) of 1.36, which sits in the 99th percentile of its annual range -- meaning short-term options traders have rarely been more put-biased.

Digging deeper, a short squeeze could fuel additional gains. Short interest is down 1.8% in the last two reporting periods, yet the 4.40 million shares sold short make up 25.3% of the stock's available float, or more than a week's worth of pent-up buying power.

Investors looking to get in on RH's next move may want to consider options. The security's Schaeffer's Volatility Index (SVI) of 51% sits in the relatively low 14th percentile of its annual range. In other words, option traders are pricing in relatively low volatility expectations at the moment. What's more, the equity's Schaeffer's Volatility Scorecard (SVS) ranks at 99 out of a possible 100, implying that RH has tended to exceed volatility expectations in the past year -- a boon for option buyers. 


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