27% profit every 20 days?
This is what Nic Chahine averages with his option buys. Not selling covered calls or spreads… BUYING options. Most traders don’t even have a winning percentage of 27% buying options. He has an 83% win rate. Here’s how he does it.
The restaurant industry has been hammered by the COVID-19 outbreak in 2020, sending share prices throughout the space tumbling. However, certain restaurants are better-positioned to weather the downturn than others.
On Wednesday, Bank of America analyst Gregory Francfort raised his price target for Dunkin Brands Group Inc (NASDAQ:DNKN) from $60 to $72 and said Dunkin is much better-equipped for a socially distanced world than coffee competitor Starbucks Corporation (NASDAQ:SBUX).
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Slam Dunk: Dunkin’s most recent financial update suggested open store same-store sales were down 23% in the second quarter as of May 23, but had improved to just -15% in the week prior to the update.
Fortunately, Francfort said Dunkin’s drive-thru assets help offset the in-store weakness and help insulate Dunkin’s business more than Starbucks.
Bank of America estimates that Dunkin has drive-thrus at 55% of its points of distribution compared to just 34% for Starbucks.
Long-Term Threat: While in-store business may bounce back in time, Francfort is concerned the recent shift toward in-home K-Cup consumption may prove somewhat sticky.
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Given the uncertain outlook and the near-term headwinds, Bank of America has a Neutral rating for both Dunkin and Starbucks.
Dunkin’s drive-thru advantage over Starbucks has been reflected in its stock’s outperformance since the March bottom. Dunkin shares have gained more than 66% in that time, more than doubling the 31% gain by Starbucks. Both stocks are still down more than 10% year to date.
Benzinga’s Take: A shift in business from in-store to the drive-thru is not a problem for either company in the long-term. The key metrics investors should be monitoring is a potential permanent shift to K-Cups and any changes in overall market share.
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Photo courtesy of Dunkin.
27% profit every 20 days?
This is what Nic Chahine averages with his option buys. Not selling covered calls or spreads… BUYING options. Most traders don’t even have a winning percentage of 27% buying options. He has an 83% win rate. Here’s how he does it.