Macy's Stock Pops After Blowout Quarterly Win

The security could soon benefit from a short squeeze

Digital Content Manager
May 18, 2021 at 10:04 AM
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The shares of Macy's Inc (NYSE:M) are up 1.7% to trade at $19.49 this morning, after the massive retailer reported blowout first-quarter earnings of 39 cents per share -- much higher than Wall Street's estimated losses of 41 cents per share -- as well as a revenue beat. To boot, the department store also raised its annual sales and earnings forecasts, noting it expects strong demand as vaccinated shoppers return to stores to splurge on luxury goods such as fragrances, fine jewelry, and watches.

The equity has experienced its fair share of volatility over the past few months. After a major Jan. 27 bull gap pushed shares to a two-year high of $22.29, the security pulled back to the $13 level. Shares surged back above the $21 level in mid-March, however, and just yesterday broke through overhead pressure at the $18.50 mark, with support from the 100-day moving average. Year-over-year, M sports a whopping 253.5% lead.

Analysts are still overwhelmingly pessimistic towards the equity, with seven of the eight in question carrying a tepid "hold" or worse rating, while only one said "strong buy." Plus, the 12-month consensus target price of $13.65 is a 28.8% discount to current levels. In other words, M seems overdue for a fresh round of upgrades and/or price-target hikes. 

A short squeeze could create even more tailwinds for Macy's stock going forward. Short interest rose 13.4% over the last two reporting periods, and the 42.83 million shares sold short make up a hefty 13.9% of the stock's available float, or nearly three days' worth of pent-up buying power.

Drilling down to today's options activity, 13,000 calls and 9,080 puts have already crossed the tape, which is five times the intraday average. Most popular is the May 20 call, followed by the 14.50 put in the same monthly series. Buyers of these premiums are expecting the security to move in either direction by the end of the week, when the contracts expire.

Now seems like a great opportunity to weigh in on M's next move with options. The security's Schaeffer's Volatility Index (SVI) of 68% sits in the low 10th percentile of its annual range, indicating options players are now pricing in low volatility expectations.

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