Wingstop Stock Plunges After Double Downgrade

Puts have been more popular than usual in the last two weeks

Deputy Editor
Mar 18, 2022 at 9:25 AM
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The shares of Wingstop Inc (NASDAQ:WING) are down 4.2% this morning at $116.01 ahead of the open, after a double downgrade by Piper Sandler. The analyst in question downgraded the restaurant chain to "underweight" from "overweight" and trimmed its price target to $102 from $195. The brokerage cited profit-denting expenses ahead as the restaurant industry moves into an expansion cycle and Wingstop losing its grip on its premium valuation.

Coming into today, analysts were split on WING, with nine rating it a "strong buy," versus nine that said "hold." Plus, its 12-month consensus price target of $167.53 was a whopping 38.3% premium to last night's close. All of this leaves ample room for additional downgrades an/or price-target cuts in the coming weeks.

Short interest rose by 5.9% in the most recent reporting period, too. The 2.65 million shares sold short represents 8.9% of the equity's total available float. At its average pace of trading, it would take shorts more than six days to buy back their bearish bets. 

There is pessimism in the options pits too, it seems. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), Wingstop sports a 10-day put/call volume ratio of 3.85, which ranks higher than 94% percent of reading from the past year. This means nearly four puts have been picked up for every call over the last two weeks.

Since September 2021 when Wingstop stock hit an all-time high of $187.35, the shares have experienced serious volatility on the charts that culminated in multi-year lows near $110, on March 15. WING is on track for its fifth-straight weekly loss, and was already off 29.9% for 2022, heading into today's session.


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