Panera Bread (
may provide fresh food, but its stock looks stale.
ChartWatch doesn't typically follow restaurant stocks,
although the column did present the bearish case for
. Restaurant stocks are volatile and prone to violent shifts
because margins and sales can turn on a dime due to rising
commodity costs and consumer whims. It's a tough business.
Though the restaurant industry is challenging, Panera has done a
tremendous job of gaining market share and achieving
profitability. In fact, net income climbed 27% to $173.4 million
Analysts are positive about future results, too. Analysts expect
Panera to earn $7.04 per share this year - a 19.5% increase from
last year. More impressively, that earnings growth outpaces the
14.6% growth analysts expect from sales.
Though the expectations are positive, investors seem to have
priced it into the shares. PNRA has a P/E ratio of 24 and the
stock has hardly budged since September.
The shares have been trapped in roughly a 10% range (blue lines)
from about $155 to $170 during the past seven months. Not even
two analyst upgrades were enough to definitively overcome $170
resistance this morning.
This chart shows the price of
shares along with an important price channel to
Though consolidation phases are normal and healthy, I'm
concerned about the laziness of the stock. PNRA has been unable
to garner bullish momentum since October. Meanwhile, most stocks
have raced higher during the same period.
Investors seem unwilling to pay a premium for PNRA. That could be
because of its high P/E ratio, the fact that it doesn't pay a
dividend or both. Whatever the reason, the shares appear trapped
below $170. Now may be a great time to either sell your position
or short sell the stock, expecting a decline to $155. Stops can
be placed slightly above $175. Thus, the risk is five points
while the reward is 15, giving this trade setup a healthy 3-to-1
Equities mentioned in this article: CMG, PNRA
Positions held in companies mentioned above: