Common Cents purchased a November 20 $90 call option for $7.00. Common Cents will look to sell this option at a minimum of $8.00, which will require RH's share price to increase by up to 8.9% by November 20.
RH will release its quarterly earnings on September 10. As stated in a previous RH post, RH has typically increased in share price after these earnings release while gradually decreasing afterward. Any slowdown in product sales due to a West Coast Port slowdown was likely accounted for by analysts, who lowered estimates after the last quarterly release due to this issue. Therefore, it is likely that RH's share price "pop" after its earnings release will occur for the next release.
A risk to this trade is the fear of a possible Fed interest rate hike in mid September. This may cause an initial downturn in the stock market; however, I think the hike, if it actually occurs, will be forgotten a month or so afterward. In addition, the lack of a rate hike may cause a short-term boost in the markets.
Common Cents Take: RH has a high likelihood of overachieving for the quarterly earnings release on September 10. Some short-term headwinds exist that may keep RH's share price down; however, RH's actual business is generally not affected by the headwinds.
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