Williams-Sonoma Issues Warning Ahead of Holiday Season

Analysts and options traders are targeting WSM after the event

Assistant Editor
Nov 19, 2021 at 10:43 AM
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Williams-Sonoma Inc (NYSE:WSM) stock is down 4.2% to trade at $209.17 at last check, brushing off a third-quarter earnings and revenue beat, after the company warned of product shortages before the holiday season, noting that inventory levels will likely remain skewed until the middle of next year, and reporting higher-than-expected expensese for the quarter. No fewer than six analysts chimed in with price-target hikes after the earnings event, however, J.P. Morgan Securities slashed its price target to $191 from $200, citing the likelihood of slower demand for home furnishings, which boomed during the pandemic. 

Today's drop has WSM falling even further from its Nov. 16 record high of $222.60, thought the security is still trading above all long- and short-term moving averages. The equity is still trading at two times where it was a year ago, up 109% in the last 12 months, with the 160-day moving average capturing all major pullbacks since mid-2020. 

The majority of analysts are bearish on Williams-Sonoma stock. Of the 19 analysts in coverage, 14 carry a "hold" or worse rating. Meanwhile, the 12-month consensus price target of $209.39 is a slim 1.7% discount to current levels.

Short interest, meanwhile, is slowly starting to unravel, down 2.3% in the last reporting period. Short interest still makes up 8.2% of the stock's available float, though, and would take over six days to cover at the stock's average daily pace of trading. 

Options traders have been similarly pessimistic, per WSM's 10-day put/call volume ratio of 1.80 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). This ratio stands higher than 89% of readings from the past year, showing puts being picked up at a much faster-than-usual rate. 

Today, however, calls are winning out, with 2,187 calls and 1,249 puts across the tape  so far. Options volume is running at seven times the intraday average, with call volume pacing for the 99th percentile of its annual range. The November 220 call is the most popular, expiring at the end of the day today. 

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