Campbell Soup Stock Boosted By Kraft Buyout Rumors

General Mills is also reportedly interested in buying Campbell Soup Company

Managing Editor
Jun 25, 2018 at 9:39 AM
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Campbell Soup Company (NYSE:CPB) stock is up 8.6% to trade at $41.95, after the New York Post reported that Kraft Heinz (KHC) is interested in buying the packaged food maker. The report also cited General Mills (GIS) as a possible suitor for Campbell, which earlier this month expressed openness to exploring strategic options. The news was followed by a price-target hike to $32 from $30 at Credit Suisse, although the analyst in coverage expressed doubt that Campbell's majority stakeholders would sell the company. 

It's been a rough year for Campbell Soup stock, which had shed shed 20% year-over-year as of Friday's close and fell to a more than five-year low of $32.63 on June 7. However, the shares have now filled their mid-May earnings-induced bear gap. Since then, the shares have bounced back more than 28%, and now trading above their 80-day moving average for the first time since mid-February. 

Options buyers are likely happy about the recent surge. On the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), Campbell stock has racked up a 10-day call/put volume ratio of 6.21 -- in the 92nd annual percentile. This indicates that traders have bought to open CPB calls over put at a faster-than-usual clip during the past two weeks.

Of course, brokerages are still down on the stock. Of the 13 analysts covering the security, 11 rate it a "hold" or worse. Furthermore, the equity's average 12-month price target of $35.69 sits below its current perch.

Meanwhile, short interest increased by 30% in the two most recent reporting periods to 36.04 million shares, the most since at least 2002. This represents nearly 20% of CPB's total available float, and more than four days of pent-up buying power, going by average daily volumes.

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