Retail Stock Meets Resistance Ahead of Earnings

URBN options are affordably priced at the moment, though

Deputy Editor
Aug 20, 2020 at 3:06 PM
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Urban Outfitters (NASDAQ:URBN) is down 3.2% to trade at $19.06 this afternoon, taking a breather ahead of its second-quarter earnings report after the close on Tuesday, August 25. URBN is up 14% in the last month, but is currently meeting some resistance below the $21 region. Eyeing its first weekly loss in the last four, the shares' 180-day moving average has emerged as a stiff ceiling as well. 

urbn august 20

In the past eight quarterly reports, six of URBN's eight post-earnings sessions were negative, including a 15.2% drop back in November, and a 7.9% fall back in May. The security averaged a next-day return of 6.9%, regardless of direction, which is much smaller than the 11.3% move the options market is pricing in this time around.

There's pessimism among the brokerage bunch, with only six out of the 20 in coverage sport a "buy" or better rating. Meanwhile, the 12-month consensus price target of $19.06 is exactly in line with current levels, implying a post-earnings pop could trigger a shift in analyst sentiment.

And even though earnings are looming, the equity's Schaeffer's Volatility Index (SVI) of 67% stands higher than just 20% of all other readings from the past 12 months, implying near-term option traders are pricing in extremely low volatility expectations.  


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