Price Forecast:

Bullish Case: Foot Locker's price is undervalued at a P/B ratio of 0.9, with strong EPS growth forecasted. Market volatility reflects potential for recovery as seasonal consumer spending may lift results.

Bearish Case: Weak consumer sentiment persists, compounded by high inventory levels and competitive pressures. Recent earnings misses hint at ongoing operational challenges, potentially driving prices lower.

Potential Outcomes:

• EPS increase (30%): Positive earnings surprise boosts market confidence.
• Persisting consumer weakness (50%): Continues to suppress revenue, leading to further stock declines.
• Strategic management changes (20%): Could either stabilize or destabilize market perception and performance.

Trading Oracle: Engage in a bullish strategy by selling put credit spreads, targeting $20.0/$19.50 puts expiring January 2025. This leverages current volatility and offers a high probability of profit (~70%). Favorable risk-reward profile due to high implied volatility and recent market trends.

December 12, 2024