Bullish options flow was detected in COTY stock on November 19, 2020.
Make sure to review this lesson on options trading so that you understand the chart above.
Bullish option flow detected in Coty was 78,084 calls trading, 12x expected, and implied vol increasing over 18 points to 92.89%. 12/4 weekly 6 calls and Nov-20 6 calls were the most active options, with total volume in those strikes near 22,500 contracts.
The bullish options flow was caused by COTY stock being upgraded by Citi on November 19, 2020.
Citi analyst Wendy Nicholson upgraded Coty to Buy from Neutral with a price target of $10, up from $4.50. While some could argue that Coty’s leverage, past track record and likely lower margins might warrant a lower valuation, the company has the potential to “pick a lot of low hanging fruit” in terms of accelerating growth, improving margins and deleveraging its balance sheet, Nicholson tells investors in a research note. The analyst believes the shares can go a lot higher from current levels.
On November 12, 2020, Coty Inc. (NYSE: COTY) announced that the strategic sale of its Professional and Retail Hair business – including the Wella, Clairol, OPI and ghd brands (together, “Wella”) – to KKR is anticipated to complete by November 30, 2020. The Company and KKR have entered into amended and restated transaction agreements which remain substantially the same as the original agreements, with the primary adjustment being the removal of certain completion conditions and the sale and transfer of certain entities to Wella post-completion.
The sale will see KKR own 60% of the standalone Wella entity, while Coty retains the remaining 40%. Upon closing, Coty will receive $2.5bn of proceeds, net of tax and expenses. The net proceeds coupled with Coty’s retained 40% stake in Wella, initially valued at $1.3bn, will considerably strengthen Coty’s capital structure. Coty expects to utilize approximately $2bn of the net proceeds to pay down its Term Loans A and B on a pro rata basis, with the remainder used for general corporate purposes.
On November 6, 2020, Coty reported Q1 adjusted EPS of 11c versus the consensus estimate of (5c). The company reported Q1 revenue of $1.69B versus the consensus estimate of $1.08B.
The success of our recent launches, including Marc Jacobs Perfect, Gucci’s Bloom Profumo di Fiori, Sally Hansen’s good.kind.pure, and CoverGirl’s Clean Fresh, confirm the strength and enduring potential of our brand portfolio. As we have leaned into our digital efforts and activation, we have seen double-to-triple digit e-commerce sell-out growth across most markets, with our e-commerce penetration as a percentage of our overall sales doubling to 13%. As a result, we have strengthened our positions in our core markets, gaining market share in prestige fragrances across the U.S., U.K, and Germany, and stabilizing our mass color cosmetics market share in the U.S. These milestones, along with the strengthening of our executive leadership team with Isabelle Bonfanti as Chief Commercial Officer of Luxury and Jean-Denis Mariani as Chief Digital Officer, put us well on the path to the new, future Coty.
CEO Sue Nabi said: “Our first quarter results are a testament that a stronger, more focused and more flexible Coty, is emerging in the middle of the COVID-19 pandemic and better prepared to face any future market disruptions. Impressively, the organization has continued to adapt to the new normal, executing on our financial and operational priorities, including profit and cash flow protection, strong innovation performance, e-commerce momentum, and strengthened positioning in core markets. Our results met or exceeded our expectations by all measures, showing significant improvement from Q4 across all of our regions, and across our prestige and mass businesses. Our stringent cost control enabled over 20% growth in our adjusted operating income and over 50% growth of the total company EPS”.