Analyst Bear Note Rolls in as Put Traders Blast Kohl's Stock

There's plenty of optimism surrounding KSS as well

Deputy Editor
May 16, 2022 at 1:46 PM
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The shares of Kohl's Corporation (NYSE:KSS) were last seen down 3% at $47.04, following a price-target cut to $50 from $61. J.P. Morgan Securities, which kept its rating at "neutral," issued the bear note just ahead of the company's first-quarter earnings report, which is due out before the open on Thursday, May 19. Below, we'll dive into department store name's technical setup, its recent options activity, and its recent post-earnings performances.

On the charts, Kohl's stock breached the 320-day moving average on May 6, and has traded well below the trendline ever since. KSS also stands just below its year-to-date breakeven level, off 4% in 2022. However, its worth noting that a large chunk of that deficit came via the broader market's recent selloff, which pressured the equity to lose 13.1% last week. A slew of relevant earnings reports and data from the retail sector this week are due out this week, which could bode well for the shares, while its 14-day Relative Strength Index (RSI) reading of 25.3 suggests a short term-bounce could be right around the corner, as it sits firmly in "oversold" territory.

KSS Chart May 16

Ahead of earnings, and certainly before today's bear note, KSS was making waves in the options pits. In fact, the stock showed up on Schaeffer's Senior Quantitative Analyst Rocky White's list of stocks on the S&P 400 (IDX) that have attracted the highest weekly options volume over the last two weeks. Per White's list, 125,875 puts exchanged hands in that time, versus 89,879 calls. The July 50 put was the most popular, followed by the 60 call in the June series.

MAO Chart May 16

There's been a shift in sentiment amongst these traders for today's trading. At the session's halfway point, 21,000 calls have been exchanged, which is five times the intraday average and easily outpaces the 1,749 puts traded so far. Coincidentally, the most popular position today is the June 60 call, followed up by the 70 call from the same monthly series. 

Those betting on calls might be in for a treat, as post-earnings sessions have proved fruitful for Kohl's stock, according to data going back two years. In the last eight sessions following earnings results, KSS moved higher in five, including pops after its last three reports. Over the last eight quarters, the stock averaged a next-day move of 8.1%, regardless of direction; however, this time around, the options market is pricing in a much larger 21.7% move for Friday's trading.

Further, short interest is falling off, down 7.8% in the most recent reporting period. However, the 11.26 million shares sold short still make up 8.9% of the stock's available float. It would take almost four days to buy back these bearish bets, at the stock's average daily pace of trading. In other words, additional tailwinds could roll in, should short sellers' pessimism continue to unwind.

 

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