CAKE reports Q4 earnings tonight after the close, the implied move is about 4% which is shy to its 4 qtr avg of 4.75%
Analysts expect the company to grow earnings by 14% this year , and sales only 7%, both decelerating from last year, while the stock trades at ~15.5x.
This is not a name that I know well at all, but I have been to their restaurants and find the quantity, the quality and the cost of their food rather disgusting. This is a restaurants that does not need to exist. That is obviously purely anecdotal, but in the Nation of heart disease and diabetes, we don’t need 25 inch plates of fried food and foot high plates of cheesecake……(obviously I am feeling a bit fat today).
On a purely technical basis, the stock is sitting on massive support dating back to its July breakout and right on its 200 day moving average. a break below could see a move back to $31/30.[caption id="attachment_22879" align="aligncenter" width="589"] CAKE 1 YR chart from Bloomberg[/caption]
THE BIG KICKER HERE IS $4 GAS AT THE PUMP, AND I WOULD SUSPECT THAT THESE GUYS, WHICH SIT ABOVE FAST SERVE ARE STARTING TO BEAR THE BRUNT, COUPLED WITH THE RECENT PAYROLL TAX HIKE.
One last thing, yesterday the company stated that they replaced the President who had been in that position since early 2010 for no apparent reason…..That sounds a tad fishy to me.
I want to have short exposure with defined risk, and I am going to size this as a small trading position.
TRADE: CAKE ($33.20) Bought the March 32/30 Put Spread for .45
-Bought 1 March 32 Put for .65
-Sold 1 March 30 Put at .20
Break-even on March Expiration:
-Profits btwn 31.55 and 30 make up to 1.55, max gain of 1.55 below 30
-Losses of up to .45 bwtn 31.55 and 32 and max loss of .45 above 32.
**THIS IS A SMALL TRADING POSITION.