Ralph Lauren Calls Surge After Upbeat China Outlook

Analysts are adjusting their price targets today, too

Assistant Editor
May 27, 2020 at 3:38 PM
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The shares of Ralph Lauren Corp (NYSE:RL) are down 0.2% at $81.18 at last check, after the retailer reported a steeper-than-anticipated fiscal fourth-quarter loss. Today's damage has been contained though, after CEO Patrice Louvet predicted that the company's growth in China will return to pre-COVID-19 levels by the second quarter. Following the news, Piper Sandler hiked its price target to $74 while Cowen and Company chimed in with a bump up to $78. Meanwhile, CFRA slashed its price target by $40 to $85. 

Earlier today, RL was trading at its highest point since mid-March, but the rally ran out of steam at its 80-day moving average and $95 region. The shares boast a 21% lead this quarter, distancing themselves from their April 3 11-year bottom of $59.82.

RL may 27

Coming into today, analyst sentiment was mixed, with seven analysts in coverage sporting a "buy" or better and the remaining eight at a tepid hold. Meanwhile, the 12-month consensus price target of $87.94 is an 8.4% premium to current levels.

RL options traders are going wild today, with 5,477 calls crossing the tape so far -- a whopping 9 times the average daily volume. Most popular by far is the weekly 5/29 85-strike call, where new positions are being opened. Trade-Alert detects some sell-to-open activity going on at this strike, indicating options traders are eyeing the $85 level as a short-term ceiling through Friday, when the options expire.

The surge in calls today is a turnaround from the last 10 days, where 1.04 puts have been bought for every call at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). 

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