NEW BEARISH Plays
Restaurant Brands Intl. - QSR - close: 37.35 change: -0.83
Stop Loss: 39.25
Target(s): To Be Determined
Current Gain/Loss: Unopened
Entry on September -- at $---.--
Listed on September 10, 2015
Time Frame: Exit
Average Daily Volume = 1.0 million
New Positions: Yes, see below
The burger wars continue as McDonald's recently rejected Burger King's proposal for a "peace day" offering to create the McWhopper. More on the McWhopper in a moment. Most of the fast food or quick service stocks seem to be struggling and the group displayed relative weakness today.
QSR is in the services sector. According to the company,
"Restaurant Brands International Inc. is one of the world's largest quick service restaurant companies with more than $23 billion in system sales and over 19,000 restaurants in approximately 100 countries and U.S. territories. Restaurant Brands International owns two of the world's most prominent and iconic quick service restaurant brands - TIM HORTONS® and BURGER KING®. These independently operated brands have been serving their respective guests, franchisees and communities for over 50 years."
A couple of weeks ago QSR's Burger King brand launched a short-lived PR campaign to raise aware for "Peace Day" on September 21st. Peace Day actually started back in 1999 and approved by the United Nations as a day of ceasefire and non-violence.
QSR took out a full-page ad in the New York Times and the Chicago Tribune on Wednesday, August 26th, proposing a ceasefire in the burger wars between McDonald's and Burger King. QSR claims they are trying to raise aware of Peace Day but it sure looks like a clever way to get a lot of publicity.
Just for fun you can see the ad campaign here:
QSR's McWhopper website:
And this YouTube video (1:37 minutes)
Burger King - McWhopper Proposal
McDonald's rejected the idea and suggested a simple phone call will do next time (instead of full page ads).
A simple phone call
The whole McWhopper story is just a sideshow and will not have any impact on QSR's business.
QSR's most recent earnings report (late July) came in better than expected. Earnings of $0.30 per share beat estimates by six cents. Revenues did fall -1.6% but at $1.04 billion it was better than expected. Both the Tim Horton and Burger King businesses saw mid-single digit comparable store sales gains on a constant currency basis. Shares of QSR rallied on this news but the surge ran out of gas in early August.
When the market corrected lower in late August shares of QSR just collapsed with a drop of -17.8% in less than three days. The oversold bounce in QSR failed at resistance near $40.00 and is 50-dma. Now shares are on the verge of breaking down below key support at $37.00.
If QSR breaks down the next support level could be the late 2014 low near $33.00. The point & figure chart is a lot more pessimistic and forecasting at $26.00 target. Tonight we are suggesting a trigger to launch bearish positions at $36.85.
Trigger @ $36.85
- Suggested Positions -
Short QSR stock @ $36.85
- (or for more adventurous traders, try this option) -
Buy the OCT $35 PUT (QSR151016P35) current ask $0.75
option price is a current quote and not a suggested entry price.
Entry disclaimer: To avoid an unfavorable entry point, we will not launch a new play if the stock gaps open more than $1.00 past our suggested entry point.
Option Format: symbol-year-month-day-call-strike