How an Unwinding of Skepticism Could Push Kraft Heinz Stock Higher

The stock is back above two of its previous post-earnings closes

Mar 29, 2022 at 10:19 AM
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The shares of Kraft Heinz Co (NASDAQ:KHC) are trading above the 1,000-day moving average for the first time since the companies merged in 2015. What’s more, the stock is now above its two previous post-earnings closes -- suggesting results were well-received -- and sports a 9.2% year-to-date lead. With these levels of support in place, we are recommending a new long position on KHC.
khc march 29

 

Analysts are skeptical of Kraft Heinz stock, leaving plenty of room for upgrades moving forward. In fact, 18 of the 23 analysts in question carry a tepid "hold" or worse rating. Short sellers have been piling on the equity, too, with short interest up 16.5% over the last two reporting periods. Should some of this pessimism start to unwind, KHC could surge even higher.
 
A shift in the options pits could create additional tailwinds for the security. At International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), KHC's 50-day put/call volume ratio ranks higher than all but 10% of annual readings. This means long puts have been getting picked up at a much quicker-than-usual pace.
 
It's also worth noting the equity's Schaeffer's Volatility Scorecard (SVS) sits at 71 out of 100, suggesting the stock has exceeded options traders' volatility expectations in the past year. Meanwhile, KHC’s implied volatility (IV) stands in the low 22nd percentile.
 
Finally, our recommended call has a leverage ratio of 9.33, and will double in a 10.14% pop in the underlying shares.
 
Subscribers to Schaeffer's Weekend Trader options recommendation service received this KHC 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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