Some companies have fared better than others this year. The restaurant space has been decimated, as sales have plummeted. But while that’s been hard-hitting for family-owned operations, large, publicly-traded firms have held up well.
These are the companies that were already capable of providing their goods via pickup (such as drive-thru) and delivery options. So it’s no surprise that these restaurants have held up better, and will likely continue to do so.
However, since the announcement of a Covid vaccine, a number of restaurant companies have seen declines. The view is that takeout sales there will decline as more are able to take advantage of dining in yet again.
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Even against that backdrop, McDonald’s (MCD), the mother of fast-food chains, appears to be on track for a sales recovery. Increasing demand has led to a rising price garget from UBS. Shares remain about 10 percent off their all-time highs.
Action to take: Shares reached oversold levels last week and then started to move with a gap higher yesterday. In the short-term, shares well likely move over their 50-day moving average before pushing higher to new all-time highs.
Amidst that backdrop, the March $220 calls look attractive. Trading at about $4.80, they offer mid-to-high double-digit returns if the current move higher in shares leads to another bull market move that tests all-time highs. If shares get back to $230, the option would be worth $10 at expiration, just over a double.