Bull Notes Galore for Kohl's Stock After Sephora Partnership

The equity has doubled in value this quarter alone

Digital Content Manager
Dec 2, 2020 at 10:28 AM
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The shares of Kohl's Corporation (NYSE:KSS) are up 0.8% at $36.81 at last check, after French cosmetics concern Sephora said it would open shops at about 850 Kohl's stores by 2023, as the department store operator doubles down on its beauty category. As a result, the security earned an upgrade from Deutsche Bank to "buy" from "hold" and at least four price-target hikes, including a lofty one from Telsey Advisory to $40 from $29.

On the charts, Kohl's stock has more than tripled off an April 3, all-time-low of $10.89. The security traded sideways for several months after cooling off from its June rally, struggling with overhead pressure at the $24 level. However, newfound support from the 20-day moving average has helped the equity break through that ceiling. This quarter, KSS has already doubled in value.

Analysts were majorly hesitant toward the equity coming into today, leaving plenty of room for even more upgrades and/or additional price-target hikes moving forward. Of the 11 in coverage, nine carried a tepid "hold" or worse rating. Echoing this is the stock's 12-month consensus target price of $32.88, which is a whopping 9.1% discount to last night's close.

Digging deeper, a short squeeze is in play that could push the security even higher. Short interest jumped 11.5% in the most recent reporting period, and the 27.44 million shares sold short make up a significant 17.6% of the stock's available float, or nearly three days' worth of pent-up buying power.

The options pits lean more bullish, however, with calls popular. This is per the equity's 50-day call/put volume ratio of 2.50 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), which sits higher than 76% of readings from the past year. In simpler terms, calls are being picked up at a quicker-than-usual clip. Given the amount of short interest tied up into KSS, it's possible some of these calls could be shorts seeking an options hedge.

Regardless of direction, now could be an opportune time to take advantage of the security's next move with options. The stock's Schaeffer's Volatility Index (SVI) of 66% sits in the relatively low 26th percentile of its annual range. This means KSS currently sports attractively priced premiums.

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