More Pain for Papa John's Stock as Traders React to CEO Shake-Up

PZZA got hit with an all-too-familiar price-target cut amid a C-suite change

Managing Editor
Dec 22, 2017 at 10:40 AM
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Pizza delivery chain Papa John's International, Inc. (NASDAQ:PZZA) is in focus this morning, after the company announced late Thursday that company founder John Schnatter is stepping down from the CEO role, with Steve Ritchie -- the company's current chief operating officer -- set to take his place effective Jan.1. Schnatter will remain in his role as chairman of the Louisville-based company. In response, brokerage firm Jefferies this morning cut its price target on PZZA to $60.

Papa John's stock is down about 4% at $56.88 this morning. The stock has had a rough year, shedding almost 35% over the past 12 months, and bottoming out in annual-low territory around the $55 level in late November and early December.

Jefferies is somewhat late to the party with today's price-target cut, as most analysts have already downwardly revised their expectations for the slumping stock. PZZA's average 12-month price target currently checks in at $69 -- down considerably from the Sept. 22 mean of $90.17.

In the options pits, however, calls on PZZA have rarely been more popular. Total call open interest on the stock arrived today at a 52-week high of 19,688 contracts, absolutely dwarfing the fewer than 5,500 put options in open interest.

That said, some of those calls may have been picked up to hedge the massive short position against Papa John's shares. Short interest accounts for nearly 17% of the equity's float, or 6.3 times its average daily trading volume.

In any case, the shares are now trading well below peak front-month call open interest of 3,495 contracts at the January 2018 62.50-strike call -- the bulk of which were bought to open back on Dec. 1, as PZZA attempted to bounce back from its recent lows.


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