Papa John's Stock Slammed With "Sell" Rating

PZZA stock could move after earnings next week

by Emma Duncan

Published on Feb 19, 2019 at 10:04 AM

Shares of pizza maker Papa John's International, Inc. (NASDAQ:PZZA) are down 2.8% at $43.99, after receiving a downgrade to "sell" from "hold" at Stifel. The brokerage firm also slapped the pizza stock with a $3 price-target cut to $35, and trimmed its 2019 earnings estimates for the company. The analyst said Papa John's "will need to commit to an everyday low price menu that will probably hurt franchisees' profits until consumer perception of its value changes."

PZZA has been in a long-term downtrend since late 2016, but most recently suffered a blow after the firm abandoned plans to sell itself. More recently, the stock has been struggling to surmount resistance in the $44-$45 area, and remains 10% higher year-to-date.

Options traders have remained optimistic toward the pizza concern. This is per the stock's 50-day call/put volume ratio of 3.17 at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), which ranks in the 83rd annual percentile. It other words, calls have been purchased over puts at a faster-than-usual clip in the past 10 weeks.

Looking ahead, Papa John's is slated to report earnings after the market closes on Tuesday, Feb. 26. The shares jumped 5.5% the day after their last earnings report, back in November. On average, PZZA has moved 5.4% the day after reporting, looking back eight quarters, regardless of direction. This time around, the options market is pricing in a slightly bigger-than-usual 7.7% swing for the shares.

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