Activist Buzz Boosts Time Warner Inc, Pressures Darden Restaurants, Inc.

Time Warner Inc (NYSE:TWX) and Darden Restaurants, Inc. (NYSE:DRI) are moving in different directions amid activist investor updates

Jan 12, 2016 at 11:34 AM
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Media giant Time Warner Inc (NYSE:TWX) and restaurant operator Darden Restaurants, Inc. (NYSE:DRI) are each moving higher today, amid circulating reports involving separate activist investors. Let's take a closer look at the news, as well as the technical and sentiment backdrops, on TWX and DRI. 

TWX spiked out of the gate thanks to rumors Carl Icahn has been buying up shares of the stock. While  Icahn has since refuted these claims, the media stock remains 1.4% higher at $70.62.

Despite the various headwinds hurting the broader market in 2016, TWX has had a brilliant start to the year, adding over 9%. What's more, the shares are poised to close above their 10-week moving average for a second consecutive week, which is promising, since this trendline served as stiff resistance from mid-November through year-end 

As we've noted, TWX option traders have been overwhelmingly call-biased recently. Analysts, too, have taken a strong bullish stance toward the stock. Fifteen of the 22 analysts that track the shares say they're a "buy" or better, and no one on Wall Street recommends selling them. Additionally, Time Warner Inc's (NYSE:TWX) average 12-month price target comes in at $84.45 -- a nearly 20% premium to current levels. 

DRI, meanwhile, is dealing with the news that Starboard Value has trimmed its stake in the firm by roughly 11% -- just a week after the activist investor's attempt to shake things up at Yahoo! Inc. (NASDAQ:YHOO). The restaurant stock is down slightly at $61.85, but has recently outperformed the broader market. Specifically, DRI has beat out the S&P 500 Index (SPX) by 19.5 percentage points over the past 40 sessions.

However, after trading well above its 20-day moving average throughout most of December, the stock is on the verge of closing below this trendline for a third consecutive session. In fact, DRI was rejected at this level earlier today. 

Elsewhere, the sentiment backdrop on DRI has a clear bearish tilt, especially in the options pits. Looking at data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), over seven DRI puts have been bought to open for every call during the past 10 sessions. The resulting 10-day put/call volume ratio of 7.53 falls in the 90th annual percentile, meaning there's been an unusual interest in the stock's puts lately. 

Echoing this put bias is Darden Restaurants, Inc.'s (NYSE:DRI) Schaeffer's put/call open interest ratio (SOIR). This reading stands at an elevated 2.42, revealing put open interest more than doubles call open interest among options set to expire within three months. On top of this, the SOIR is only 1 percentage point away from an annual high, meaning short-term option traders have taken a much more put-skewed approach, compared to what's normally seen. 

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