Analyst: Macy's Stock Boasts Solid Setup

Call volume is ramping up in response to the upgrade

Deputy Editor
Apr 3, 2023 at 10:21 AM
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JPMorgan Securities upgraded Macy's Inc (NYSE:M) to "overweight" from "neutral" this morning, while also hiking its price target by $1 to $29. The analyst in coverage is "confident in the company full-year 2023 top- and bottom-line plans, thanks to "growth vectors" that include private label, off-mall store expansion, and its digital marketplace. 

Call traders are out in droves, with 42,000 contracts changing hands already this morning, volume that's18 times the intraday average amount. Led by the weekly 4/6 19-strike call, new positions are being opened at the top five contracts.

Macy's stock was last seen up 6.5% to trade at $18.61. The shares have started the year on a down note, off by 8.2% so far in 2023 after double-digit declines in February and March. Today's pop, however, has M trading back above its 20-day moving average. 

There's room for additional analysts to jump on the bullish bandwagon, as just four of 10 in coverage rated the stock a "strong buy" vs six "hold" or worse ratings coming into today. What's more, the shares sold short account for 6.8% of Macy stock's total available float.

A continued unwinding of pessimism in the options pits could have bullish implications as well. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), M's sports a 50-day put/call volume ratio of 1.21 that stands higher than 98% of readings from the past year. In other words, long puts have been picked up at a quicker-than-usual clip during the past 10 weeks. 

For those that want to take advantage, Macy's stock is seeing well-priced premiums at the moment. The security's Schaeffer's Volatility Index (SVI) of  45% stands in the low 12th percentile of readings from the past 12 months, implying that options players are pricing in low volatility expectations at the moment. 


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