Lowe's Stock Moves Lower Despite Beating Earnings Estimates

The equity currently sports attractively priced premiums

Digital Content Manager
Feb 24, 2021 at 10:13 AM
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The shares of Lowe's Companies Inc (NYSE:LOW) are down 3.5% at $162.65 this morning, despite the home improvement concern reporting fourth-quarter earnings of $1.33 per share -- 12 cents higher than what analysts had anticipated. The company also posted a revenue win and beat quarterly same-store sale estimates by just over 6%, as people continued to turn to home projects during the Covid-19 pandemic, boosting demand.

Earlier this month, Lowe's stock broke through overhead pressure at the $175 mark to get within reach of its Oct. 16, all-time high of $180.67, which is more than triple a March 19, seven-year low of $60. And while shares pulled back during yesterday's session, the 80-day moving average came in as a floor, though the trendline is now acting as resistance. Longer term, LOW sports a 38.2% year-over-year lead.

Analysts are overwhelmingly optimistic towards the security, with 14 of the 20 in coverage carrying a "buy" or better rating, while six say "hold." Plus, the 12-month consensus target price of $192.69 is a 14.3% premium to the stock's current levels. 

The equity could benefit from a shift in the options pits, where puts are popular. This is per LOW's 10-day put/call volume ratio at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), which sits higher than 89% of readings from the past year. In other words, puts are being picked up at a faster rate than usual.

Drilling down to today's options activity, 8,092 calls and 4,320 puts have exchanged hands in just the first half hour of trading, which is four times what is typically seen at this point. Most popular is the April 180 call, followed by the weekly 2/26 167.50-strike call, with new positions being opened at the latter.

Now may be a good opportunity to weigh in on Lowe's stock's next move with options. The security's Schaeffer's Volatility Index (SVI) of 36% stands in the extremely low 13th percentile of its annual range, meaning the equity sports attractively priced premiums at the moment.

Lastly, LOW looks like it has been a great target for premium buyers in the past year, based on its Schaeffer's Volatility Scorecard (SVS) of 83 out of 100. This indicates the shares have regularly made bigger moves than options traders were pricing in the past 12 months.

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