NEW BULLISH Plays
Kate Spade & Co. - KATE - close: 21.82 change: +0.33
Stop Loss: $19.85
Target(s): To Be Determined
Current Gain/Loss: Unopened
Entry on October -- at $---.--
Listed on October 12, 2015
Time Frame: Exit prior to earnings on November 5th
Average Daily Volume = 2.2 million
New Positions: Yes, see below
The luxury goods and accessories industry has been crushed this year. Look at charts for Coach (COH), Michael Kors (KORS), and Kate Spade (KATE). The good news is that the group may have found a bottom. KATE looks poised to leave its rivals in the dust.
KATE is in the consumer goods sector. According to the company,
"Kate Spade & Company (KATE) designs and markets accessories and apparel principally under two global, multichannel lifestyle brands: kate spade new york and Jack Spade. With collections spanning demographics, genders and geographies, the brands are intended to accent customers' interesting lives and inspire adventure at each turn. The Company also owns the Adelington Design Group, a private brand jewelry design and development group that markets brands through department stores and serves jcpenney via exclusive supplier agreements for the Liz Claiborne and Monet jewelry lines. The Company has a license for the Liz Claiborne New York brand, available at QVC, and Lizwear, which is distributed through the club store channel."
KATE's most recent earnings report was August 5th. The company announced its Q2 results were $0.08 a share. That missed estimates by three cents. Revenues were only up +5.6% at $281 million. That also missed estimates. The company pointed out their Q2 results still represents several businesses they are winding down. Their core sales of the KATE brand actually rose +20%. Management bumped their guidance and the stock popped on the news.
Traditionally the fourth quarter is the time to own retail-related stocks as investors key in on the holiday shopping season. After shares of KATE were almost cut in half from their 2015 highs near $35.00, Wall Street analysts have turned bullish on the stock. Stephens upped their rating to an overweight and put a $31 price target on the stock. Wunderlich offered a bullish perspective and has a $39 target for KATE. Citigroup named KATE one of their top picks for the rest of the year and issued a $33 price target.
If this rally continues KATE could see more short covering. The most recent data listed short interest at 10% of the 127 million share float. Technically KATE has been consolidating sideways below resistance at its 100-dma and the $22.00 level. Today's display of relative strength (+1.5%) also produced a close above the 100-dma. We want to hop on board if shares breakthrough the $22.00 level. Tonight we are suggesting an entry trigger at $22.05.
Trigger @ $22.05
- Suggested Positions -
Buy KATE stock @ $22.05
- (or for more adventurous traders, try this option) -
Buy the NOV $23 CALL (KATE151120C23) current ask $1.10
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