I can honestly tell you that I have never said these three words in succession before in my entire life: Tractor Supply Company. But I just did, from the floor, after falling off of my chair upon seeing the 5 year chart of the company’s stock, TSCO.
This stock was up more than 70% last year alone, with the opening tick being the low of the year and the closing tick being the high of the year. That’s pretty nuts for a retail company that grew earnings 20% last year and sales by 11%. So what does this store sell and to whom you may ask?? Per Bloomberg:
With the stock trading at 31x trailing, and 26x forward earnings, I would say there needs to be some sort of disconnect that I and any other rational stock market investor is missing……there has to be some Chinese Internet, or Social Media or 3D printing angle right??
The stock caught my eye because they report earnings tonight after the close, the options market is implying about a 5% one day move, which is basically inline with the 4 qtr avg move.
Despite being a nearly $10 billion market cap company, the options trade by appointment. Meaning they are illiquid, wide, and have little open interest. There are a total of 22,800 of options open interest, with 10k calls and 12k puts with the largest lines: 3,000 Feb 75 calls, 2,400 Feb 65 puts, 2300 April 72.50 puts and 2,000 April 67.50 puts.
While the 5 year performance is eye-popping, the one year chart below looks a bit vulnerable on a weaker than expected report or guidance, putting the 200 day moving average (circled) very much in play down at $64.40.
It’s been a tough couple of weeks for retailers reporting earnings and TSCO will be an interesting one to watch give the run it’s had. BBBY’s fall from the recent all time highs is probably stuck in my head as a potential outcome, now down 20% from their Jan 7th report, while not a prediction by any means, the stock is clearly priced to perfection.