The brokerage firm called the apparel retailer a "catalyst call: buy idea"
The shares of Lululemon Athletica Inc (NASDAQ:LULU) are up 0.7% at $358.75 at last check, after Deutsche Bank named the security a "catalyst call: buy idea" as a short-term investment. The analyst in question said the athletic apparel retailer was one of this holiday shopping season's outperformers, and expects LULU to report positive quarterly earnings.
On the charts, Lululemon stock has been cooling off from a Sept. 2 all-time-high of $399.89. Though shares spent most of 2020 surging, the equity has been struggling with overhead pressure at the $390 level over the past couple of months. Still, the ascending 120-day moving average has contained several of the security's latest pullbacks, and LULU is up 52.7% year-over-year.
Analysts were already majorly optimistic toward the security coming into today, with 19 of the 28 in question carrying a "buy" or better rating, while nine called it a tepid "hold." Plus, the 12-month consensus price target of $403.86 is a 12.4% premium to current levels.
The options pits echo that optimism, with calls popular. This is per Lululemon stock's 10-day call/put volume ratio of 1.64 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), which stands higher than 72% of readings from the past year. This means there is a healthier-than-usual appetite for long calls of late.
Now could be a good opportunity to take advantage of LULU's next move with options. The stock's Schaeffer's Volatility Index (SVI) of 47% sits in the low 24th percentile of its annual range, indicating the equity sports attractively priced premiums at the moment.
Lastly, the security's Schaeffer's Volatility Scorecard (SVS) stands at an elevated 89 out of 100. In other words, LULU has exceeded option traders' volatility expectations during the past year -- a boon for options buyers.