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Hawk’s Nest

Capri (CPRI) Options Signal Ahead of Massive Rally

by | Jan 1, 2021

Capri (CPRI) has rallied sharply since our 9/24 focus write-up on large call buying and the activity has continued with size positions opening in February expiration recently. The CPRI May $25 calls highlighted in our 9/24 report are now worth $18, a 500% rise.

Here was our original write-up:

Capri Holdings (CPRI) with buyers active today in May $25 calls with 3700X trading $2.84 to $2.91, bullish positioning while peer Tapestry (TPR) has seen a lot of call activity recently as well. CPRI May $25 calls saw 1000 open on 9/22 and an 8/17 opening sale of 10,000 January $15 puts a large recent trade. CPRI shares are pulling back to its rising 21 MA this week after a strong run this month with shares briefly clearing the 200 day moving average and now pulling back under with a 38.2% retracement. The $3.15B maker of luxury apparel and footwear trades 7X Earnings, 0.67X Sales and 5.5X FCF. Capri Holdings has a portfolio of three iconic, founder-led fashion luxury houses, and is poised to return to growth in FY22. CPRI presented at the Goldman Retail Conference on 9/10 and showed the improving trends of sales through August. It has a goal of $7B in revenues from $3.6B in 2021 with Michael Kors, Jimmy Choo and Versace brands. Analysts have an average target of $19.50 with short interest at 8.8% of the float, down 25% Q/Q. MSCO upgraded to Overweight this week with a $29 target noting a faster than expected recovery in sales and raised forecasts as well as seeing potential for Versace margin expansion and sales growth. Deutsche Bank with a $25 target in July citing better results in Q2 with gross margin expansion at the two largest brands and better trends in digital sales. Hedge Fund ownership fell 11% in Q2 filings, Eminence Capital a top holder.”