A number of retail stocks have found new life toward the end of 2017, including Lululemon Athletica Inc. (NASDAQ:LULU). The shares enjoyed their highest close in over a year yesterday, thanks to their strong push up the charts in the second half of the year. By the numbers, LULU stock has surged 67.5% since the end of May, with a solid chunk of these gains coming after an impressive earnings release earlier this month. In fact, Lululemon stock is pacing for its best quarter since early 2016, up nearly 27%. Meanwhile, analysts keep upping their outlooks.
Just this morning, BofA-Merrill Lynch upped its price target to $89 from $80 — in uncharted territory — citing strong holiday sales from its store checks. This comes a week after BMO lifted its price target on the equity to $75 from $64. Ten brokerage firms still have just “hold” ratings in place, however, so there’s room for even more bullish attention to come the stock’s way.
Interestingly, near-term options traders are displaying bearish tendencies, as well. This is according to Lululemon Athletica’s Schaeffer’s put/call open interest ratio (SOIR) of 1.60, which ranks just 2 percentage points from a 52-week high. Not only does this mean put open interest easily outweighs call open interest among options expiring within three months, but it shows such a put-skew is very unusual.
An unwinding of bearish options could help fuel more gains for the shares, though. And anyone looking to buy short-term options can do so for an apparent bargain at the moment. That’s because the retail stock’s Schaeffer’s Volatility Index (SVI) of 32% ranks in just the 11st annual percentile, signaling relatively muted volatility expectations.
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