Analyst Says Take Profits on YUM Stock Despite Trendline Support

Wall Street analysts discussed Pizza Hut and Domino's in their stock commentaries

by Josh Selway

Published on Jan 11, 2019 at 10:03 AM

Yum! Brands, Inc. (NYSE:YUM) is trading down 1.6% at $90.30 after Goldman Sachs downgraded the stock to "sell" from "neutral," and lowered its price target to $76 from $83. The firm said it prefers names like Texas Roadhouse (TXRH) and McDonald's (MCD) from the restaurant space, and also questioned the strength of the company's Pizza Hut and Taco Bell businesses.

The majority of analysts are already skeptical of YUM shares, handing out eight "holds" versus six "strong buys." The equity has been strong in the past 12 months, adding nearly 10% and tapping an annual high of $94.13 on Dec. 13. Moreover, the 80-day moving average continues to hold as support.

Traders in the options pits have been bullish, going by International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) data. More than 1,200 calls were purchased in the past 10 sessions, compared to 507 puts. Call open interest has risen to 44,102 contracts, ranking in the 99th percentile of its annual range.

Fellow restaurant chain Domino's Pizza, Inc. (NYSE:DPZ) is also on Wall Street's radar. Cowen began coverage with an "outperform" designation and $290 price target, calling the company a "category leader within the largest delivery cuisine." In other words, they really know how to deliver pizza. The note also said that Cowen's data suggests consumers are not shying away from ordering pizzas. 

DPZ stock is up 1% today at $248.78, trading just above the recently supportive 320-day moving average. Sentiment is somewhat split in the analyst community, with just over half those in coverage handing out "strong buy" recommendations.

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