Wingstop Stock Takes Flight After Upgrade

WING has found support at its 160-day trendline

Managing Editor
Dec 28, 2018 at 9:35 AM
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The shares of Wingstop Inc (NASDAQ:WING) are up 2.3% this morning at $62, after Wedbush upgraded the restaurant chain to "outperform" from "neutral" while trimming its price target to $69 from $71. The analyst in coverage waxed bullishly on the company's valuation, and sees room for upside to its 2019 earnings per share and margins.

Since early 2017, Wingstop stock has essentially been carving out a channel of higher highs, culminating in an all-time Oct. 17 peak of $72. WING subsequently pulled back with the broader market, though, and has shed nearly 7% this quarter as of yesterday's close. However, the damage appears to have been contained by the shares' 160-day moving average, a trendline that was support for a similar pullback in August. Year-to-date, the stock still boasts a 74% gain.

A short squeeze could add some wind to WING's sails. Short interest fell by 5% in the last two reporting periods, yet the 3.82 million shares sold short still represents a healthy 13.2% of the equity's total available float. At its average pace of trading, it would take shorts more than eight days to buy back their bearish bets. 

There is pessimism in the options pits too, it seems. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), Wingstop sports a 10-day put/call volume ratio of 4.96, which ranks 4 percentage points from an annual high. This indicates the rate of put buying relative to call buying has been quicker than usual.

Echoing that, WING's Schaeffer's put/call open interest ratio (SOIR) of 1.81 sits in the 80th percentile of its annual range, indicating that near-term traders have rarely been more put-biased in the past 12 months. 

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