Yum! Brands, Inc. (
) scored an upgrade from Credit Suisse on Monday, as the brokerage
firm raised its target for YUM from $54 to $58, while maintaining
its "outperform" rating on the shares. The new target implies a 16%
premium to the stock's Monday close at $50.02. What's more, Credit
Suisse noted that while it sees slowing momentum for the quick
service restaurant, the firm still expects 12% earnings growth from
YUM in 2011.
Despite Monday's optimistic note, the brokerage bunch is
actually pretty split when it comes to YUM. According to
, the equity has earned eight "strong buys" and two "buy" ratings,
compared to 10 tepid "holds." This configuration could leave the
door open for upgrades, should other brokerage firms agree with
Credit Suisse's assessment.
Meanwhile, option players are decidedly more
about YUM, as evidenced by the stock's Schaeffer's put/call open
interest ratio (SOIR) of 1.22, which reveals that puts comfortably
outnumber calls among options in the front three months. This ratio
ranks in the 96th annual percentile, pointing to near-peak levels
of skepticism among short-term option players.
In the same vein, YUM's 10-day International Securities Exchange
(ISE) and Chicago Board Options Exchange (
) put/call volume ratio of 1.96 indicates that puts bought to open
have nearly doubled calls purchased during the last two weeks. This
ratio ranks above 92% of all other readings taken during the past
12 months, suggesting that traders on the ISE and CBOE have seldom
initiated YUM puts at a faster pace.
This trend continued on Monday, with 2,566 puts changing hands
on YUM -- well above the stock's expected single-session put volume
of just 1,656 contracts.
YUM's December 49 put was most popular, with over 1,500
contracts traded at this strike -- the majority of which crossed at
the ask price, indicating they were likely purchased. Open interest
increased by 1,436 contracts overnight, confirming that new puts
were added here. By buying to open the December 49 put, these
traders are counting on YUM to sink below the $49 level over the
next three weeks.
As a result of Monday's activity at the December 49 put, this
strike now carries 1,831 contracts in open interest. Peak put open
interest for the front-month series, however, can be found at the
45 strike, with 2,160 contracts in open interest. With YUM hovering
right around $50, both of these puts are currently
out of the money
Technically speaking, YUM has been doing quite well lately, with
the shares recently rallying to a series of
. After peaking above $52 a few weeks ago, YUM pulled back
slightly, and has since been consolidating right around the $50
level. During this time, the equity's 10-week moving average has
caught up with the shares, and could provide a springboard to
launch YUM on the next leg of its uptrend.
From a contrarian perspective, the abundance of pessimism levied
toward this outperforming stock can actually make for a strong
bullish case. With YUM set to bounce off technical support, a
reversal of sentiment from the bears -- of which there are plenty
-- could help the restaurant stock continue its quest for record
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