Options Players, Analysts Hungry for Chipotle Stock After Earnings Beat

The equity is up nearly 50% year-over-year

by Fernanda Horner

Published on Jul 23, 2020 at 11:32 AM
Updated on Jul 29, 2020 at 10:51 AM

The shares of Chipotle Mexican Grill, Inc. (NYSE: CMG) are down 1.8% at $1,162.40 at last check, after the chain reported second-quarter profits of $0.40 per share on $1.36 billion in revenue, considerably higher than Wall Street's estimates of  $0.35 on $1.33 billion, respectively. The company attributed the strong results to soaring digital sales during the COVID-19 pandemic. As a result, CMG earned no less than 14 price-target hikes from analysts this morning, with one of the most significant ones coming from Wells Fargo to $1,282 from $969.

On the charts, CMG has nearly tripled from its mid-March lows near the $415 level, culminating in its latest record-high of $1,187 -- notched yesterday, July 22. The equity has been breaking records on a monthly basis since May, however, with consistent support from the 20-day moving average in recent weeks. Longer term, Chipotle stock is up nearly 50% year-over-year.

Analysts were largely hesitant toward CMG coming into today, with 16 of the 26 in coverage sporting a "hold" or worse rating, while the remaining 10 called it a "strong buy." Meanwhile, the stock's 12-month consensus price target of $1,182.93 is a 1.6% premium to current levels. 

That bearish sentiment is echoed in the options pits. the last 50 days, 1.27 puts were picked up for every call at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). This ratio sits higher than 88% of readings from the past year, meaning puts are being picked up at a faster-than-usual clip.

Moreover, CMG's Schaeffer's put/call open interest ratio (SOIR) of 2.65 stands higher than 99% of readings from the past year, implying short-term options traders have rarely been more put-biased.

Today's options activity shows calls and puts running at a relatively equal clip. So far, 6,904 calls and 6,917 puts have crossed the tape -- three times what is typically seen at this point. Most popular is the monthly August 1,000 put, with positions being bought to open here. The most popular call contract is the 1,200 call in the same monthly series, where positions are also being opened. 

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