Dollar General reported better-than-expected earnings thanks to higher demand
The shares of Dollar General Corp. (NYSE:DG) are down 1.5% at $214.30 at last check, despite the company reporting better-than-expected third-quarter earnings of $2.31 per share. The retailer attributed the strong results to higher demand for cheaper groceries and household items during the pandemic. However, it also refused to provide a forecast for the rest of the year, citing coronavirus uncertainties as the primary reason.
On the charts, Dollar General stock has experienced unprecedented growth in the past year. Shares have been beating records on a nearly monthly basis since April, to reach an Oct.16, all-time-high of $224.81. Meanwhile, the stock's 80-day moving average has been a constant source of support along the way, containing at least four pullbacks. Year-over-year, DG sports a 38.5% lead.
Analysts are already majorly optimistic toward the equity, with 13 of the 17 in question giving it a "buy" or better rating, and only four calling it a tepid "hold" or worse. Echoing this, the stock's 12-month consensus target price of $229.04 is a 7.7% premium to last night's close.
A short squeeze could create additional tailwinds for DG. Short interest is up 16.1% in the most recent reporting period, and the 2.82 million shares sold account for 1.1% of the stock's available float.
Digging deeper, today's options activity show over 8,400 calls and 6,000 puts have crossed the tape, which is six times the average intraday amount. Next year's weekly 1/22 205 strike-put is the most popular, followed by the 220 strike-call in the same series, with new positions currently being opened at both.
Regardless of direction, now could be the right time to take advantage of the security's next move with options. The stock's Schaeffer's Volatility Index (SVI) of 34% sits in the relatively low 24th percentile of its 12-month range. This mean DG sports attractively priced premiums at the moment.