Post-Earnings Surge Puts the Squeeze on Chipotle Shorts

CMG stock is on track for its best day ever

by Karee Venema

Published on Apr 26, 2018 at 3:00 PM
Updated on Jun 24, 2020 at 10:16 AM

The U.S. stock market is soaring today, thanks to a strong batch of corporate earnings reports. Included in the bunch are burrito chain Chipotle Mexican Grill, Inc. (NYSE:CMG), electronic payments processor PayPal Holdings, Inc. (NASDAQ:PYPL), and chipmaker Advanced Micro Devices, Inc. (NASDAQ:AMD). Here's a closer look at how shares of CMG, PYPL, and AMD are trading today.

Chipotle Stock is Pacing for Its Highest Close Since June

Chipotle stock is holding near its intraday highs, up 24.4% at $422.30. Boosting the shares is stronger-than-expected first-quarter earnings and revenue, plus impressive same-store sales growth. The results are being seen as a positive review of new CEO Brian Niccol, who took over the embattled restaurant chain on March 5.

Adding to today's buzz is a round of bullish brokerage notes. While Cowen and Guggenheim upgraded CMG stock to the equivalent of a "neutral" recommendation, Canaccord Genuity raised its rating to "buy" from "hold." The latter also boosted its price target on to $425 from $300, the highest among the onslaught of price-target hikes the security received today.

CMG stock is now on track for its highest close since June 20, and is pacing for its biggest one-day percentage gain to date. Short sellers are likely fueling some of this upside, too. More than 3.6 million Chipotle shares are sold short -- 14.7% of the stock's available float -- and it would take more than a week to cover these bearish bets, at the average pace of trading.

PayPal Stock Surges After Earnings

PayPal reported first-quarter adjusted earnings of 57 cents per share on $3.69 billion in revenue -- more than analysts were expecting -- and upwardly revised its full-year revenue forecast to a range of $15.2 billion to $15.4 billion. The results earned PYPL stock a round of price-target hikes, including one to $98 from $97 at Nomura. And while Credit Suisse lowered its price target to $85 from $88, this is still a 10% premium to the equity's present perch.

Specifically, PYPL is trading up 4.5% at $77.34. This just echoes the stock's longer-term trajectory, with PayPal boasting a 74% year-over-year lead. Since hitting a record high of $86.32 back on Jan. 31, though, the shares have been stuck in a channel of lower highs. Familiar support has emerged at the 160-day moving average, which served as a floor for the shares in late 2016 and early 2017.

Against this backdrop, most analysts are upbeat toward PayPal, with 27 out of 33 maintaining "buy" or better ratings, and not a single "sell" on the books. Plus, the average 12-month price target of $85.15 is a healthy 10% premium to current trading levels.

AMD Stock Heads Toward Best Day Since Early 2017

Adjusted first-quarter profit for Advanced Micro Devices came in at 11 cents per share, while revenue rose 40% year-over-year to arrive at $1.65 billion -- with both numbers beating analysts estimates. The graphics chipmaker also gave strong current-quarter revenue guidance.

Wall Street has given its stamp of approval on the results, with price-target hikes coming from Susquehanna (to $8) and Stifel (to $14). J.P. Morgan, on the other hand, cut its AMD price target to $13 from $16, though this is still above the stock's current price of $10.95, up 12.8% so far today -- pacing for its best day since Feb. 1, 2017.

The shares have now made a decisive move above their 30-day moving average, which had ushered AMD lower since early March -- and to an annual low of $9.04 on April 4. A number of options traders are betting on this rally to continue through tomorrow's close. The weekly 4/27 11-strike call is most active in AMD's options pits today, and it looks like new positions are being purchased for a volume-weighted average price (VWAP) of $0.18. This makes breakeven at expiration $11.18 (strike plus VWAP).

 


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