Outperforming Retail Stock Gets Overdue Upgrade

ANF received an upgrade from JPMorgan Securities to “overweight”

Apparel retailer Abercrombie & Fitch Co. (NYSE:ANF) is up 5% to trade at $166.42 this morning, after JPMorgan Securities upgraded the stock to “overweight” from “neutral” and hiked its price target to $194 from $167. The analyst in coverage is bullish on the brand’s demand after recent marketing improvements.

Coming into today, ANF was up 336.3% over the last 12 months. Despite this massive outperformance, six of eight covering brokerages still rated the equity a tepid “hold,” leaving room on the bullish bandwagon. The equity looks like it could benefit from a short squeeze, too. Short interest fell 21.3% in the last two reporting periods, yet the 3.96 million shares sold short now make up 7.9% of Abercrombie & Fitch stock’s available float.

ANF hit a May 29 record high of $196.99 but shed 8.5% last week amid the broad market correction.  The pullback ran out of steam at $150, a level that coincides with the stock’s 80-day moving average. Year-to-date, the shares are still up nearly 80% in 2024, and officially joined the S&P 400 Midcap 400 as of today’s open.

Now seems like a great opportunity to bet on ANF’s next move with options. The equity’s Schaeffer’s Volatility Index (SVI) of 49% sits in the 15th percentile of its 12-month range. In simpler terms, option players are pricing in low volatility expectations at the moment. Plus, its Schaeffer’s Volatility Scorecard (SVS) tally of 83 out of 100 implies the security outperformed volatility expectations in the past year.

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