Teen retailer Urban Outfitters (URBN) reports fiscal Q1 results Monday after the close. The options market is implying about a 5% one day move which is well shy of the 4 qtr average of about 8%. Looking out a month, with the stock at $40.15, the June 40 straddle (the call and the put premium) is offered at about $3,40, if you thought the stock could have movement over that time period and bought that you would need a move above $43.40, or below $36.60 to make money by June expiration, or about 8.5% in either direction.
The one year chart of the stock is quite fascinating, trading in a massive range that has seen a 30% peak to trough decline, a 70% rally from the 52 week lows, and now the stock is in the midst of a 15% correction from the recent all time highs made in March:[caption id="attachment_53700" align="aligncenter" width="600"] URBN 1yr chart from Bloomberg[/caption]
To suggest that the stock is at a crucial spot in front of a potentially volatile event is an understatement as it has pulled back to the 2014 high, but also to the gap breakout level from March.
On a longer term basis, the recent failure after a new all time high, and the gap fill is less than encouraging price action. While the stock’s recent pull back may discount some bad news on Monday’s call, a meaningful miss and guide down would likely cause a gap to the mid $30s:[caption id="attachment_53701" align="aligncenter" width="600"] URBN 5yr chart from Bloomberg[/caption]
Given the recent weakness in most retail results of late, and Wednesday’s poor retail sales number for April I am hard-pressed to think that the quarter just ended is going to be spotless, and I would expect guidance to be mixed at best.
We will take a closer look prior to the print Monday night.