Outperforming Hershey Stock is a Sweet Pick for Bulls

HSY also looks ripe for a fresh round of upgrades

Oct 22, 2019 at 12:45 PM
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The shares of candy king Hershey Co (NYSE:HSY) have been on fire in 2019, up 43% so far this year. After notching an all-time high of $162.20 in early September, the security has taken a breather on the charts, pulling back to support at its 80-day moving average. Against this backdrop -- and considering Wall Street seems late to the proverbial party on outperforming HSY -- now is an opportune time to speculate on the stock’s next leg higher.

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Despite HSY’s rally this year, analysts remain skeptical. Specifically, just two brokerage firms deem the stock worthy of a “buy” or better endorsement, compared to 11 others issuing “hold” or worse recommendations. In the same vein, the consensus 12-month price target among analysts rests at just $148.20 – representing a discount to HSY’s close on Friday. As the stock rebounds, a round of analyst upgrades or price-target hikes could lift the shares even higher.

Further, peak call open interest in the standard October series of options stood at the overhead 155 strike. With those options expiring last week, HSY has a clearer path to new highs in the short term.

Finally, Hershey reports earnings this Thursday, Oct. 24. The stock has reacted positively to the last four out of five earnings releases, so history is on the side of the bulls. What’s more, our recommended call still sports a leverage ratio of 9.7, and will double in value on just a 9.6% jump in HSY shares.

Subscribers to Schaeffer's Weekend Trader options recommendation service received this HSY commentary on Sunday night, along with a detailed options trade recommendation -- including complete entry and exit parameters. Learn more about why Weekend Trader is one of our most popular options trading services.

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