Ollie's Bargain Outlet Stock Pops on Double Upgrade

The stock could benefit from a further unwinding of pessimism

Deputy Editor
May 20, 2022 at 9:34 AM
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The shares of Ollie's Bargain Outlet Holdings Inc (NASDAQ:OLLI) are bouncing this morning, last seen up 5.9% to trade at $45.75 ahead of the open, after a bull note from Bank of America Securities. The firm double-upgraded OLLI to "buy" from "underperform," and raised its priced target to $75 from $30, noting that recent over-ordering by retailers, as well as reduced consumer spending on durable goods, means the discount retailer is set to benefit from an increased supply of closeout items.

Overall, analyst sentiment toward Ollie's Bargain Outlet stock is rather pessimistic at the moment. Just yesterday, Truist Securities cut its price target on the equity to $38 from $41. Coming into today, nine of the 14 covering brokerages recommended a "hold" or worse rating, while the 12-month consensus price target of $55.64 was a 28.8% premium to last night's close. All of this to say, there's plenty room for additional upgrades/price-target adjustments.

That pessimism is likely due to OLLI's recent struggles on the charts. A December bear gap sent the shares below $55 for the first time since April 2020, and a recent attempt to break out of the slump was thwarted by the 160-day moving average. The stock now sports a 46.6% year-over-year deficit.

Ollie's Bargain Outlet stock could also benefit from a further unwinding of short interest. While short interest fell 18.5% in the last month, the 8.29 million shares sold short still account for 14.1% of the equity's available float, or more than a week's worth of pent-up buying power.

And it looks like bullish options traders have been calling OLLI's bottom in recent sessions. 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 13.72, which stands higher than 99% of readings from the past 12 months. This indicates that not only is there a healthier-than-usual appetite for calls, but nearly 14 calls have been picked up for every put in the last two weeks.


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