2 Sinking Restaurant Stocks in Irma's Path

The restaurant sector has been lagging in 2017

Managing Editor
Sep 7, 2017 at 3:20 PM
facebook twitter linkedin

Last week, Hurricane Harvey dominated headlines and wreaked havoc on markets. This week, all eyes are on Hurricane Irma. Insurance stocks are getting crushed, while travel stocks are feeling the pain, as well. The restaurant industry could be the next domino to fall, with Irma projected to make landfall in Florida this weekend. Restaurant names Fiesta Restaurant Group Inc (NASDAQ:FRGI) and Ruth's Hospitality Group, Inc. (NASDAQ:RUTH) are two stocks with heavy exposure to Florida, and thus stand to take an Irma-related hit. Below, we will take a closer look at the restaurant sector and how traders have been lining up on restaurant stocks FRGI and RUTH.

The Restaurant Sector Continues To Struggle

It's been a rough stretch for the restaurant sector, per data from Schaeffer's Senior Quantitative Analyst Rocky White. Of the 21 restaurant stocks we track, just 19% are trading above their 80-day moving average -- among the worst of all the sectors we follow. Analysts have been skeptical of the sector, too, with less than 40% maintaining a "buy" or better rating on the stocks we track.

FRGI Stock Skimming New Lows After Downgrade

At last check, Fiesta Restaurant stock was down 7.3% to trade at $15.80, and earlier touched a new four-year low of $15.50, after Piper Jaffray downgraded the shares to "underweight" from "neutral." It's been a tough year for FRGI stock, which has shed 47% year-to-date, with its 50- and 80-day moving averages leading FRGI down a path of lower lows.

Although short interest has decreased by 7% during the last reporting period, the equity remains heavily shorted. The 2.81 million shares sold short represents 10% of the stock's total available float.

RUTH Stock Breaches 50-Week Moving Average

Ruth's Hospitality Group stock is down 1.2% to trade at $18.62. The stock has been pulling back since touching a record high of $22.65 on June 8, and are now at risk of closing south of their 50-week moving average for the first time since November.

Analysts remain split over the restaurant stock. Exactly half of the four brokerages covering the shares rate them a "strong buy." And while short interest increased by 8% during the last two reporting periods, it only represents a meager 2% of the stock's total available float -- meaning there's plenty more room on the stock's bearish bandwagon


If you are not making money with options, you aren’t buying options like this…

There is no options strategy that more perfectly approaches trading the fastest moving and most volatile stocks available in the marketplace than this one. In fact, there is no strategy that better utilizes put options for optimal returns and a real trading edge over other traders in the exact same market. New options traders fail out at an incredible rate without proper trade research, execution timing, and option picking. Capitalize on Schaeffer’s 100+ years of options trading excellence with the most coveted product launch in company history. Don't waste another second... join us right now before the next round of trades are released!

Schaeffer's Investment Research Stock Pick Report


Special Offers from Schaeffer's Trading Partners