URBN options traders have been loading up on calls
Retailer Urban Outfitters, Inc. (NASDAQ:URBN) will report its fourth-quarter earnings next week on Tuesday, March 2, after the market closes. Below, we'll dig into URBN's recent post-earnings performance, and how options traders are playing the retail stock.
URBN has a rather ugly history of post-earnings moves lately. In the last eight quarters, the stock has moved lower after earnings six times, including a 7.2% drop back in May and a 4.9% fall last November. Overall, URBN averages a post-earnings move of 9.2%, regardless of direction. This time around, the options market is pricing in a 12.2% post-earnings move for the retail stock.
On the charts, Urban Outfitters stock has carved out a channel of higher highs since bottoming at $12.28 on April 3. The shares earlier today hit an 18-month high of $34.50, and are up 4.5% at last check. Year-to-date, URBN is up 33% and has support in place at its 80-day moving average.
Options traders are targeting calls at a rapid rate. This is per the stock's 10-day call/put volume ratio of 15.31 International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), which stands higher than 92% of readings from the past year. This means there's a larger-than-usual penchant for calls the last two weeks.
Even with earnings looming, URBN options are affordably priced. The security's Schaeffer's Volatility Index (SVI) of 70% stands in the 15th percentile of all other readings in its annual range, implying that options players are pricing in relatively low volatility expectations at the moment.
From a fundamental point of view, URBN is one of the few clothing retailers that still shows signs as a value play. Despite Urban Outfitters stock’s massive growth this past year, URBN has a forward price-earnings ratio of 16.53. In addition, the company’s revenues aren’t too far off from its pre-pandemic levels. Urban Outfitters has already added $380 million to its quarterly revenues since April of 2020. URBN has also added over $200 million to its net income over the past two quarters. Now, for its upcoming earnings report, Urban Outfitters' biggest task will be to maintain and build off its latest promising figures.