Tiffany Options in High Demand After LVMH Bid

Analysts are rushing to raise TIF price targets today

Oct 28, 2019 at 9:56 AM
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Tiffany & Co. (NYSE:TIF) stock is red-hot this morning, after Paris-based LVMH made a $14.5 billion buyout bid for the U.S. jeweler. The Louis Vuitton owner's unsolicited offer equates to roughly $120 per TIF share -- a 21.7% premium to last Friday's close at $98.55 per share -- and has the retail stock up 32.4% out of the gate to trade at $130.50.

Analysts have been quick to chime in, with KeyBanc calling the deal logical, and boosting its Tiffany price target to $125 from $115. Elsewhere, Oppenheimer raised its TIF target price by $26 to $126, while Credit Suisse increased its price target to $140 from $113, saying the buyout offer runs at a discount to the jewelry maker's strategic value.

Today's sharp upside move is catching short sellers off-guard, with these bears currently in control of more than 13% of TIF's available float, or more than eight times the average daily pace of trading. It's likely some of these shorts are rushing to cover, which is likely strengthening tailwinds for Tiffany stock.

Options traders are in piling onto to TIF at a quicker-than-usual clip. Already today, roughly 5,400 calls and 1,700 puts have changed hands, already surpassing the average daily volume of 4,850 contracts. The weekly 11/8 95-strike call is most active, with the bulk of the contracts crossing at the ask price.

Heading into today's trading, the retail stock was attempting to recover from its late-August lows near $80, but was running into a stiff ceiling at the round $100 mark -- home to its 320-day moving average. Today's bull gap has TIF shares pacing for their highest close since August 2018, and their biggest one-day gain in at least 20 years.

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