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Options Pop as URBN Stock Sinks Post-Earnings

Lillian Currens

The shares of apparel retailer Urban Outfitters, Inc. (NASDAQ:URBN) are trading back near their late-September levels this morning, following a badly received third-quarter earning report. The firm posted revenue of $987 million that missed analysts' consensus estimate, citing weakening demand for its women's clothing brand. The company's earnings of 56 cents per share also fell short of expectations. In response, the equity is down 14.2% to trade at $24.70. 

Urban Outfitters' sales and profit miss has the brokerage bunch buzzing. So far, five analysts have slashed their price targets, including MKM Partners, which cut its estimate to $24 from $25. On the other hand, Citigroup lifted its price target to $25 from $23. Now, the equity's 12-month consensus price target is at $27.41 -- a slight discount to last night's close. Sentiment has already been hazy on URBN, though, with 12 of the 18 analysts in coverage calling the equity a "hold." 

This cautiousness isn't all that surprising, considering the security's 25% year-to-date deficit. And while up until this week, URBN was rebounding hard off its mid-August two-year low of $19.63, it was swiftly thwarted by its descending 320-day moving average. Now, the equity is down 20.8% since last Friday's close, pacing for its biggest weekly drop since December 2008.

Already, the options pits are bustling with activity, with 11,000 calls and 16,000 puts across the tape so far -- 20 times what's typically seen at this point. It looks as if the 11/22 26-strike put is the most popular, followed by the 11/22 27-strike call, with new positions being initiated at both.