NEW DIRECTIONAL CALL PLAYS
Michael Kors Ltd. - KORS - close: 44.50 change: +0.56
Stop Loss: None, no stop at this time.
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 5.2 million
Entry on September -- at $---.--
Listed on September 8, 2015
Time Frame: Exit PRIOR to earnings in early November
New Positions: Yes, see below
Shares of KORS may have finally found a bottom. The stock has been crushed over the last 12-18 months. KORS peaked around $100 in the first half of 2014. Since then shares have been in a bear market as investors consistently sold the rallies near the trend of lower highs.
The bear-market selling accelerated back in May when KORS gapped down following its disappointing earnings and guidance. The stock finally appeared to bottom in the $37-38 region in just the last few weeks.
If you're not familiar with KORS they are in the consumer goods sector. The company has over 525 stores worldwide. They have an active e-commerce website. Plus they sell their products wholesale to specialty and department stores.
According to the company, "Michael Kors is a world-renowned, award-winning designer of luxury accessories and ready to wear. His namesake company, established in 1981, currently produces a range of products through his Michael Kors and MICHAEL Michael Kors labels, including accessories, footwear, watches, jewelry, men's and women's ready to wear, and a full line of fragrance products. Michael Kors stores are operated, either directly or through licensing partners, in some of the most prestigious cities in the world, including New York, Beverly Hills, Chicago, London, Milan, Paris, Munich, Istanbul, Dubai, Seoul, Tokyo and Hong Kong."
The company has been struggling with over exposure weakening its luxury brand name and slowing growth. Analysts have expressed concern that KORS has relied too much on its promotions and discounts to generate sales. There has been a very dramatic decline in comparable store sales from the +20% range down to mid single digits and then eventually into negative comparable store sales growth.
The company has been struggling to stop the slowdown. Management has been lowering guidance the last few quarters. However, the worst might be behind it for KORS. The company's most recent earnings report was August 6th. Wall Street was expecting a profit of $0.75 per share on revenues of $944 million. KORS managed to beat estimates on both counts with a profit of $0.87 per share. Revenues were up +11.2% to $986 million.
Their total retail sales grew +9.0% but this was offset by a -9.5% decline in comparable store sales. On a constant currency basis comp sales were down -5.0%. Management lowered their Q2 estimates. However, they actually raised their full year 2016 estimates. KORS is now forecasting EPS at $4.40-4.50 per share on revenues of $4.7-4.8 billion. Wall Street was only expecting 2016 results of $4.26 a share on revenues of $4.66 billion. The company said their comparable stores will continue to slip but the decline should slow to low single digits and on a constant currency basis actually be close to flat.
Technically shares of KORS look like they may have hit a bottom. The stock was not immune to the market's recent correction. The August 24th crash in the stock market pushed KORS to a new multi-year low. The stock has rebounded dramatically. Last week was the U.S. stock market's second worst week of the year. Yet KORS managed to post a gain.
Seasonally, one of the best times to buy retail-related stocks is the between the Labor Day holiday and Black Friday (day after Thanksgiving). Retail stocks tend to rally into the holiday shopping season.
We also noticed that if KORS can rally past short-term resistance at $46.00 it will reverse its point & figure chart from a sell signal to a new buy signal. Tonight we are suggesting a trigger to buy calls at $46.05.
Trigger @ $46.05
- Suggested Positions -
Buy the NOV $50 CALL (KORS151120C50) current ask $1.45
option price is a current quote and not a suggested entry price.
Entry disclaimer: To avoid an unfavorable entry point, we will not launch a new play if the stock gaps open more than $1.00 past our suggested entry point.
Option Format: symbol-year-month-day-call-strike