Jefferies Bull Note Pushes Cheesecake Factory Stock Higher

A short squeeze could help the equity surge even higher

Digital Content Manager
Sep 24, 2021 at 10:01 AM
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The shares of Cheesecake Factory Inc (NASDAQ:CAKE) are up 4.9% at $49.40 this morning, after the restaurant received an upgrade from Jefferies to "buy" from "hold," as well as a price-target hike to $60 from $55. The firm said it is "incrementally positive" on full-service dining stocks, with structural changes related to supply contraction, potential for share gains, and a shift toward digital and operating efficiencies creating a favorable risk/reward. The analyst in question also noted progress with vaccinations is easing Covid-19 delta variant fears.

The brokerage bunch was still undecided on CAKE coming into today, with five analysts sporting a "buy" or better rating, while six called the equity a tepid "hold" or worse. Short interest is down 14.2% in the most recent reporting period, however, but still makes up a hefty 11% of the stock's available float. Should some of that pessimism start to unwind, shares could surge even higher.  

The options pits are far more optimistic, with an appetite for calls. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), CAKE's 10-day call/put volume ratio of 4.68 stands higher than 89% of readings from the past year. This means calls have been getting picked up at a quicker-than-usual clip.

What's more, CAKE options are a bargain at the moment. The equity's Schaeffer's Volatility Index (SVI) of 42% stands higher than just 9% of readings from the last 12 months, indicating the options market is pricing in low volatility expectations for the security right now. 

Cheesecake Factory stock has struggled on the charts since rallying to an April 29, four-year high of $65.81. The shares bounced off the $41 level in August, though, and yesterday closed above the 60-day moving average for the first time since June. Year-over-year, CAKE sports a 66.6% lead.

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