Retail Stock Surges After Online Shopping Leads to Earnings Beat

The equity is up over 56% in the last six months

Digital Content Manager
Oct 29, 2020 at 10:00 AM
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The shares of Tapestry Inc (NYSE:TPR) are up 10.3% at $21.31 this morning, after the parent company of brands including Coach, Kate Spade and Stuart Weitzman reported better-than-expected fiscal first-quarter earnings of $0.58 per share. The fashion giant attributed the positive results to a high demand for luxury goods in China, as well as a jump in online shopping.  

Digging deeper, Tapestry stock has been climbing up the charts since dropping to an April 2, 17-year low of $10.18. Shares have more doubled after hitting that bottom, with support from the equity's 10-day moving average over the last several weeks. And while the $22 level seems to have recently emerged as a ceiling, TPR has still gained 79.2% in the last three months.

Analysts are mostly hesitant toward the security, however, with 11 of the 20 in coverage carrying a tepid "hold" rating, and the remaining nine sporting a "strong buy." Meanwhile, the 12-month consensus target price of $22.48 is a 2.8% discount to the stock's current perch.

In the options pits, it seems there's been an uptick in short-term put buying. This is per the stock's Schaeffer's put/call open interest ratio (SOIR) of 1.07, which sits higher than 99% of readings from the past year, suggesting these short-term option traders have rarely been more put-biased. 

This hasn't been the case so far today, however, with options bulls surrounding the Coach parent. Within the first hour of trading, over 2,516 calls have crossed the tape -- five times the intraday average -- compared to just 183 puts. Most popular by far is the weekly 10/30 24-strike call, where it looks like positions are being bought to open. This suggests that these bulls are speculating on even more upside for the equity before these positions expire tomorrow, Oct. 30. 

Now certainly looks like an ideal time to take advantage of TPR options. The security's Schaeffer's Volatility Index (SVI) of 75% sits in the relatively low 27th percentile of all other annual readings, meaning the stock sports attractively priced premiums at the moment.

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