Papa Johns International, Inc. (PZZA) was insane in food delivery for the first three quarters of 2020 and broke out through 2016 resistance and an all-time high of $ 103.25. It fell more than 25% in November support on the 200 days exponential moving average (EMA) and made up about half of those losses by January. Long-term cycles are now moving into bull mode, predicting the fast food chain will challenge and potentially break the 2020 high.
The central theses
Pizza is tough business, with competition and fickle taste buds separating winners from losers. Yum! Brands, Inc. (YUM) The Pizza Hut division learned this the hard way and has not grown in recent years despite great success at Taco Bell and KFC. In addition to the challenges of the industry, Papa Johns is faced with a unique headwind that was triggered by the departure of founder John Schnatter after his racist remarks in 2017. However, customers have since returned so the chain can resume their sports partnerships.
Longbow analyst Alton Stump has just selected Papa John’s stock as a “Top Restaurant Pick for 2021”, noting: “We anticipate Papa Johns will accelerate its innovation pipeline, resulting in an even greater increase in sales of new products in the same store than in last year … The 2021 innovation will likely include an expanded and / or improved Wings platform, additional Papadias flavor offerings, and potentially new categories such as salads. We are currently modeling a system-wide revenue growth of 8.0% for Papa John’s in 2021 overall business before consensus up 1.4%. ”
Only six analysts cover the stock, but all of them have given “buy” ratings. Price targets Currently they range from a low of $ 91 to a street high of $ 115 as the stock is set to open the session on Wednesday, which is about $ 1 below the low. That modest placement should have a positive impact in the first quarter, or at least through February 24th Publication of resultswhen the company is expected to generate earnings of $ 0.47 per share on sales of $ 465.09 million.
Selling in the same shop Statistics provide a benchmark of performance for a retail chain’s established businesses over a period of time; tax year or quarter, or a calendar year or quarter, comparing the income for the current period with the same period in the past – for example, comparing the income of the first quarter of 2020 with the income of the first quarter of 2019.
Papa John’s weekly chart (2015 – 2020)
A multi-year uptrend stalled near $ 80 in the third quarter of 2015, leading to a sharp decline that found support in February 2016. The subsequent wave of recovery hit previous highs in August before a November breakout failed in November 2017. at the beginning of the Schnatter controversy. The sell-off broke support for 2016 in the summer of 2018 before hitting a five-year low in the mid-30s.
Buyers returned after a 2019 support test, lifting the stock to a two-year high in February 2020. It broke support for 2018 in the pandemic decline and soared, completing a round trip in the high point of the first quarter in April. The breakout that followed met with exceptionally strong buying interest, which resulted in a buy spike above the 2016 resistance in July. That impulse failed in September and resulted in an interim correction with 200-day EMA support.
The upswing into 2021 has the bottom of the failed breakoutThis indicates a short-term increase in selling pressure. Conversely, a rally above USD 91.18 would trigger buy signals and encourage a rapid climb to the September high. The monthly stochastic oscillator has just started a buy cycle as the weekly turned in the opposite direction telling the bulls to be patient and expect a positive result after a bilateral price move.
A failed breakout occurs when a price moves through a certain level of support or resistance, but does not have enough momentum to maintain its direction. As some traders try to establish positions when a breaking out occurs, they can choose to close these trades if the breakout fails.
The bottom line
Papa John’s bottomed out after an interim correction and could hit new highs in the coming months.
Disclosure: The author held no positions in any of the above securities at the time of publication.