Bears Bet On Yum! Brands, Inc. (YUM) To Keep Tumbling

YUM has been targeted by bears as the company struggles to find its footing in the Chinese market

by Kirra Fedyszyn

Published on Jan 13, 2016 at 4:02 PM
Updated on Jun 24, 2020 at 10:16 AM

Fast food stock Yum! Brands, Inc. (NYSE:YUM) spent years trending higher before peaking at an all-time high of $95.90 last May. Since then, however, the shares have struggled. The stock gapped dramatically lower in early October after a dismal earnings report, eventually hitting an annual low of $66.35. YUM is now down 28% from May's record high.

Today, YUM has ricocheted between positive and negative territory -- closing down 0.1% at $69.03 -- after the company reported that same-store sales in China rose 1% in December. YUM's China performance has been a pain point of late, with the company set to spin off the division by the end of this year.

Amid the stock's high-velocity downturn on the charts, bears have taken a keen interest in YUM. During the two-week reporting period ended Jan. 1, short interest on YUM increased by more than 35%. And analysts are lukewarm at best, with 10 out of 15 brokerages rating it a "hold," and no "sells" to be seen.

Meanwhile, option traders have echoed short sellers by placing pessimistic bets. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock's 50-day put/call volume ratio of 0.87 ranks higher than 95% of all comparable readings from the past year. In fact, put open interest on YUM arrives in the 95th annual percentile, according to Trade-Alert.

This crop of skeptics could be expecting another earnings flame-out from Yum! Brands, Inc. (NYSE:YUM) in the near future. The company is due to report fourth-quarter earnings after the market closes on Wednesday, Feb. 3.


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