The stock was upgraded to “Buy” from “Hold” by Jefferies
Clothing retailer Abercrombie & Fitch Co. (NYSE: ANF) is up 0.8% to last at $ 41.49 after Moody’s changed its outlook for the stock to “positive” yesterday. Early this morning Jefferies followed suit with an upgrade to “Buy” from “Hold” in addition to raising its target price from $ 46 to $ 57. The analyst in the coverage said the brand’s upgrades and cost-cutting efforts during the Covid-19 pandemic are now starting to work.
Abercrombie & Fitch stock has torn the charts since August, hitting a seven-year high of $ 44.49 on May 28. The 60-day moving average has been a major source of support along the way as it has contained several of the stock’s pullbacks since the stock started rising. In a year-on-year comparison, the share already has an impressive lead of 215.7%.
The brokerage team has been pessimistic about the securities launched today, suggesting that more upgrades may be in the offing. Of the nine analysts in the coverage, five had a lukewarm “hold” or lower rating. Meanwhile, the 12 month consensus target of $ 51.33 is a 23.2% premium over current levels.
The stock also appears ripe for a short squeeze. Short rates rose 16% over the most recent period and the 5 million stocks sold short now account for 8.2% of ANF’s available free float.
Moving the option boxes would create additional tailwind for security. This corresponds to the 10-day put / call volume ratio of Abercrombie & Fitch stock on the International Securities Exchange (ISE), the Cboe Options Exchange (CBOE) and the NASDAQ OMX PHLX (PHLX), which indicates that in the 85th Puts are picked up faster than usual.
Now it seems like a great opportunity to bet on the next move in Abercrombie & Fitch stock with options. The Schaeffer’s Volatility Index (SVI) of 50% is in the extremely low second percentile of its 12-month range. In simpler terms, option players are currently pricing in low volatility expectations.