Perhaps one of the most remarkable stories in the business landscape during the COVID-19 pandemic, Big 5 Sporting Goods (BGFV) incurred a see-sawing journey over a nearly three year period. Prior to the global health crisis, BGFV stock struggled for traction amid waning generational interest in outdoor activities. However, the unique events of the pandemic change the company’s course for the better. Still, all good things must come to an end.

Before the world had even heard of the SARS-CoV-2 virus, the broader entertainment industry had already embarked on a paradigm shift. According to research by Syracuse University, with the dramatic growth of esports, the segment’s viewership and revenue trek put it on course to compete with traditional sports. An unfathomable concept a decade ago, digitalization in athletics threatens (in a way) to become the norm.

Whether esports ultimately supersedes real sports is beside the point. That the former is in the discussion to swing with the latter presents major concerns for BGFV stock. However, with the COVID-19 crisis forcing everyone indoors, the saturation of digital entertainment caused people to revolt, leading to the collective cabin fever which ultimately undergirded the revenge travel phenomenon.

Still, another unintended consequence of the pandemic sparked relevance in BGFV stock. Staring straight into myriad controversies, Big 5 represented one of the few publicly traded companies willing to sell firearms. Indeed, during the initial phase of the crisis, rival Dick’s Sporting Goods (DKS) announced that it would extend its ban on selling guns to another 440 stores.

Cynically, this circumstance appeared to benefit BGFV stock. As the pandemic worsened, firearms sales skyrocketed due to social instability concerns. Later, the global supply chain crisis sparked an ammunition shortage, fueling demand for the broader shooting sports industry.

Still, 2022 has not been kind to Big 5. And recent activity in the options arena poses ambiguities about what lies next.

BGFV Stock in the Crosshairs of Unusual Stock Options Volume

Following the close of the Dec. 19 session, BGFV stock represented one of the highlights in Barchart.com’s screener for unusual stock options volume. This metric shows the difference between the current volume and the average volume over the past month. Usually, traders leverage this data to determine which securities may be due for big moves ahead.

Specifically, BGFV’s volume level reached 7,914 contracts against an open interest reading of 29,525. Call volume hit 3,974 versus put volume of 3,940. The implied volatility (IV) rank hit 33.17%, which indicates the (at the money) average IV relative to the highest and lowest values over the trailing one-year period.

To quicky recap, IV signifies the expected volatility of a stock over the life of an option. As certain influencing factors for the underlying investment changes, the IV will likely change as well. Further, as demand for an option increases, so too will its IV.

The IV low for BGFV stock was 52.96% on Dec. 13, 2022. A few months earlier on Aug. 16, BGFV hit its IV high at 108.08%. Prospective investors should note that per Barchart.com’s technical analysis gauge, BGFV ranks as an average 100% sell. Unambiguously, the indicator notes that from a short-term framework to longer, all signs point to a downward trajectory.

Interestingly, at the moment, no Wall Street analysts cover BGFV stock. Part of the reason could be its incredible volatility. Per Barchart’s stats on the underlying company, its stock features a 60-month beta of 2.48. A beta of 1 indicates the target asset moving in line with the market. Any figure above 1 denotes an asset that’s more volatile than the benchmark equities index.

Firearms Lose Their Charm

At the beginning of last month, Big 5 released its third-quarter earnings report. Notably, net sales came in at $261.4 million, comparing unfavorably to the $289.6 million posted in the year-ago quarter. While management put a positive spin on the numbers based on the unique challenges of the year, it couldn’t dismiss the eventual outperformance of rival Dick’s.

Per Zacks Equity Research, Dick’s “posted revenues of $2.96 billion for the quarter ended October 2022, surpassing the Zacks Consensus Estimate by 9.55%. This compares to year-ago revenues of $2.75 billion.” In other words, even with the same challenges facing Big 5, its main competitor managed to grow the top line.

Another fundamental indictment for BGFV stock is that, as stated earlier, Dick’s made what it felt a moral decision to remove firearms from its product offerings. Under the paraphrased trope of “go woke, go broke,” Dick’s should have failed. Instead, it’s shining brightly while Big 5 again struggles for traction.

While the near-term trajectory of BGFV stock is anyone’s guess, the fundamentals don’t appear encouraging, especially when stacked against the competition. Therefore, investors should exercise caution regarding the underlying company.

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