Analyst Bets on Yum China Stock Before Earnings

Analysts were already a big fan of Yum China stock coming into today

by Emma Duncan

Published on Oct 28, 2019 at 9:36 AM
Updated on Jun 24, 2020 at 10:16 AM

Global fast food name Yum China Holdings Inc (NYSE:YUMC) is up 2.3% at $44.58 this morning, after brokerage firm Jefferies initiated coverage with a "buy" rating and $54.60 price target. The target is a 25% premium to Friday's close of $43.57, and top the equity's Sept. 13 annual high of $48.36. The bull note also comes just ahead of the company's quarterly report tomorrow.

Yum China stock has outperformed on the charts in 2019, now up 29% year-to-date, with recent support emerging at the 200-day moving average. The stock has pulled back slightly from the aforementioned mid-September peak, but now looks to be in recovery mode.

From a broader perspective, nearly 70% of analysts sport a "buy" or "strong buy" rating on Yum China stock. The equity's average 12-month price target also sits all the way up at $51.27, representing a 17% upside to current levels.

Albeit amid absolute light volume, YUMC is sporting a Schaeffer's put/call open interest ratio (SOIR) of 1.99, which ranks in the 80th annual percentile. In other words, speculators are more put-skewed than usual among options set to expire in three months or less, and an unwinding of this bearish sentiment could send the equity even higher.

Looking ahead, Yum China is slated to report third-quarter earnings after the close tomorrow, Oct. 29. The equity has closed higher the day after reporting in the last four quarters, including a 13.9% surge this time last year. This time around, the options market is pricing in a 7.4% swing, slightly larger than YUMC's average swing of 6.9% from the past two years.


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