Options Bulls Target Macy's Stock After Earnings Impress

The company also announced a new $2 billion share buyback program

Deputy Editor
Feb 22, 2022 at 10:53 AM
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The shares of retailer Macy's Inc (NYSE:M) have seemingly bucked the broad-market downtrend, up 68.2% in the last 12 months, and are now eyeing a 5.3% lead for 2022. An upbeat fourth-quarter earnings release is keeping this wind at the equity's back. Macy's just reported profits of $2.45 per share on $8.67 billion in revenue -- topping analysts'  estimates -- while its full-year net sales forecast also came in higher than expected. The department store company cited strong holiday sales for the beat, and also announced a $2 billion share buyback plan as well as a 5% hike in its dividend. 

M was last seen up 8.7% at $27.93, set for its highest close since early January. The $25 level, which roughly coincides with M's 140-day moving average, has emerged as a floor in 2022. Yet above looms $28, an area the shares have only toppled once on a closing basis this year. 

Analysts have yet to chime in, but bull notes could be on the way. Of the nine in coverage, just three say "strong buy," compared to six "hold" or worse ratings. Meanwhile, short sellers have been hitting the exits, down 8.2% in the last two reporting periods, but a further unwinding of this pessimism could put additional wind at the equity's back, as short interest makes up 10.1% of the stock's available float. 

Options traders took a bullish stance before Macy's earnings. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the security sports a 10-day call/put volume ratio of 4.13, which stands higher than 78% of readings from the past year. In other words, long calls have been picked up at a quicker-than-usual clip during the past two weeks. 

Today's trading echoes this sentiment. So far 66,000 calls have exchanged hands, compared to 17,000 puts. Overall volume is running at six times the intraday average. The most popular contract by far is the weekly 2/25 28-strike call, where positions are being opened, followed distantly by the 27-strike call in the same series. 

 




 
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