Analyst: Foot Locker Stock Will Struggle During a Recession

FL is set to snap a three-day win streak

Deputy Editor
Mar 29, 2023 at 9:36 AM
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Foot Locker Inc (NYSE:FL) stock is 1.2% lower ahead to trade at $39.46 this morning, after UBS downgraded the retailer to "sell," noting that the company will struggle in the event of a recession.

The bear note comes despite last week's stellar fourth-quarter earnings report that saw FL trade as high as $47. Today's pullback would see the stock snap a three-day win streak, and move back closer to its year-to-date breakeven mark. Year-over-year, however, FL remains more than 30% higher. 

A short squeeze could keep the wind at the stock's back. Short interest fell by 4% in the most recent reporting period, yet the 8.52 million shares sold short accounts for nearly 10% of FL's total available float. 

The options pits show a penchant for calls. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the security's 50-day call/put volume ratio of 2.42 ranks higher than 99% of readings from the past year, showing long calls being picked up at a much faster-than-usual rate. 

FL is seeing well-priced premiums at the moment, too. The stock's Schaeffer's Volatility Index (SVI) of 41% stands higher than just 8% of all other readings in its annual range, implying that options players are pricing in low volatility expectations at the moment. 


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