Luxury Brands Stock Eyes Key Ceiling After Top-Line Beat

The stock has tacked on over 75% in six months

Nov 5, 2020 at 9:14 AM
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Capri Holdings Ltd (NASDAQ:CPRI) is in focus this morning, after reporting fiscal second-quarter earnings and revenue that came in well above Wall Street's forecasts. The Michael Kors parent also reported strong demand in China, as well as a surge in online sales due to the pandemic. As a result, CPRI is already up 3.4% in pre-market trading, last seen at $24.

After being rejected by the $24 area for the last month, Capri stock is poised to reclaim this area for the first time since early March. Longer term, the equity has tacked on 75.8% over the last six months, with support from its 80-day moving average along the way. 

Meanwhile, short interest is down 11.7% during the last reporting period, but there is still plenty of pessimism to be unwound that could push CPRI higher. The 9.46 million shares sold short account for 6.7% of Capri stock's available float. It would take three and a half days to buy back these bearish bets, at CPRI's average pace of trading.

Additional tailwinds could come from a shift in analyst sentiment. Of the 18 analysts covering the equity, 12 maintain a tepid "hold" stance, while the 12-month consensus price target of $21.86 is a 6.1% discount to last night's closing perch of $23.28.

Calls are the popular choice in the options pits though. The stock's 50-day call/put volume ratio at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) stands higher than 76% of readings from the past year. And now looks like the perfect time to enter with options, as it is currently seeing attractively priced premiums. CPRI's Schaeffer's Volatility Index (SVI) of 46% sits higher than just 12% of readings in its annual range, suggesting short-term options are pricing in relatively low volatility expectations.

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