Abercrombie & Fitch Stock Reverses Gains on Tepid Holiday Forecast

The equity remains up over 34% year-over-year, however

Digital Content Manager
Nov 24, 2020 at 11:31 AM
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The shares of Abercrombie & Fitch Co. (NYSE:ANF) are down 3.1% at $22.01 this morning, reversing course after hitting an annual high of $23.82 earlier in the session. The retail giant reported better-than-expected third-quarter earnings and revenue, attributing the upbeat results to a 43% jump in online sales, as consumers turned to its Gilly Hicks brand for loungewear and comfortable clothing during the pandemic. However, ANF also forecast a lukewarm holiday quarter, citing the recent spike in COVID-19 cases, which could create new in-store restrictions in the coming months. 

On the charts, Abercrombie & Fitch stock has more than tripled off its April 2, all-time-low of $7.41. Though the stock traded mostly sideways following its June rally attempt, shares started climbing up the charts again in August, with consistent support from the 60-day moving average. Longer term, ANF sports a healthy 34.6% year-over-year lead.

Analysts were mostly pessimistic toward the equity coming into today, leaving plenty of room for upgrades and/or price-target hikes going forward. Of the 10 in coverage, seven carried a tepid "hold" or worse rating. Plus, the stock's 12-month consensus target price of $16.64 is a whopping 24.3% discount to current levels.

Digging deeper, a short squeeze could create additional tailwinds for the security. Short interest is up 8.7% in the last two reporting periods, and now the 4.40 million shares sold short account for a hefty 17.4% of the stock's available float, or nearly a week's worth of pent-up buying power. 

The options pits lean more bullish, however. This is per the security's 50-day call/put volume ratio of 5.34 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), which sits higher than 96% of readings from the past year. In simpler terms, calls are being picked up at a quicker-than-usual clip. 

Drilling down to today's options activity, much of that excitement seems to be fading. So far, 1,401 puts have crossed the tape, which is three times the average intraday amount. Meanwhile, calls are still outnumbering puts, with 2,777 exchanged, though volume is running at just 1.78 times the intraday average. Still, the January 2021 25-strike call is the most popular, followed by the 11/27 22.50-strike put.

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