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Brand Face-Off: Chipotle Mexican Grill, Inc. vs. Yum! Brands, Inc.

Evaluating CMG and YUM from technical and sentiment viewpoints

by 5/13/2014 1:17:50 PM
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With the passing of Cinco de Mayo, it seems more than appropriate to make burrito master Chipotle Mexican Grill, Inc. (NYSE:CMG) and Taco Bell parent Yum! Brands, Inc. (NYSE:YUM) contestants in this week's Brand Face-Off.

On the charts, Chipotle and Yum! Brands have fared quite differently in recent months, with the former down 19.2% from its March 21 all-time high of $622.90, and the latter up 16.3% from its Jan. 31 year-to-date low of $65.83. CMG's recent technical woes have taken the stock more than 5% below its year-to-date flat line to trade at $503.60. Plus, throughout the past few weeks, the shares have been stuck under their previously supportive 40-week moving average. Meanwhile, YUM recently made its way into positive year-to-date territory to perch at $76.54. However, the stock remains plagued by resistance around the $78 mark -- a level the shares haven't toppled since November, on a daily closing basis.

Weekly Chart of CMG since January 2013 With 40-Day Moving Average
Chart courtesy of StockCharts.com
Daily Chart of YUM since November 2013
Chart courtesy of StockCharts.com

In the options pits, Yum! Brands sports a Schaeffer's put/call open interest ratio (SOIR) of 0.60, with calls easily outpacing puts among options expiring within the next three months. What's more, this ratio ranks 3 percentage points from a 12-month low, indicating the current amount of short-term call open interest (compared to put open interest) is nearing an annual-high level.

Likewise, Chipotle's short-term speculators are also more call-heavy than usual, per the equity's SOIR of 0.90, which ranks lower than 98% of comparable readings from the past year. However, given CMG's weak technical backdrop, this could spell trouble. To be specific, an extension of the stock's downward trajectory may cause bullish bettors to hit the exits, which could create additional headwinds for the shares.

The brokerage bunch is also bullish toward Chipotle, dishing out 13 "buy" or better endorsements, versus nine "holds" and not a single "sell" suggestion. Again, more pressure could be added to the shares, should analysts downwardly adjust their outlooks on CMG. Yum! Brands shares, on the other hand, may end up benefiting from a round of upgrades in the near term, as 12 of the stock's 22 covering analysts maintain "hold" recommendations.

All in all, Yum! Brands, Inc. (NYSE:YUM) seems to have a better chance of moving north, from a contrarian perspective, compared to Chipotle Mexican Grill, Inc. (NYSE:CMG). With that being said, YUM has been declared the "winner" of this week's Brand Face-Off.

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