Monday, March 26, 2012

Buffalo Wild Wings (BWLD) - Stock Hits New High as Vol Pops Off Analyst Comments

BWLD is trading $93.67, up 6.4% with IV30™ up 12.0%. The LIVEVOL® Pro Summary is below.


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Buffalo Wild Wings, Inc. is an owner, operator and franchisor of restaurants featuring a variety of menu items, including its Buffalo, New York-style chicken wings spun in any of its 14 signature sauces or four signature seasonings.

This is a vol note on a stock that has just hit an all-time high. I found BWLD using a custom scan searching for names where IV30™ is up at least 10% on the day. The scan details are below with a snapshot if you want to build it yourself in Livevol® Pro.

Custom Scan Details
Stock Price GTE 10
Average Option Volume GTE 1,200
Days After Earnings GTE 5 and LTE 60
IV30™ Percent Change GTE 10%
IV30™ GTE 10

The goal here is find stocks more than $10, with a greater than 10% rise in IV30™ (short-term implied) that is not due to an earnings date, with enough option liquidity to trade.

Let's start with the news today that's pushing the stock and vol:

When it comes to high-flying Buffalo Wild Wings, one analyst believes lofty chicken wing costs won’t clip growth at the sports-themed restaurant chain. On Monday, Stephens analyst Will Slabaugh hiked his 12-month price target on Buffalo Wild Wings to $110 a share from $100. He said the growth story remains undervalued.

At Buffalo Wild Wings’ newer locations, average weekly sales growth has been outpacing growth at company restaurants open more than one year for multiple quarters, Slabaugh said in a research report.

“We continue to believe the most important and often overlooked pieces of the story are what we expect to be years of meaningful average weekly sales outperformance from impressive new unit openings,” he said.

Source: MarketWatch via Yahoo1 Finance -- Buffalo Wild Wings: Analyst calls it an undervalued growth story, written by Matt Andrejczak.

The BWLD Charts Tab is included (below). The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20™ - blue vs HV180™ - pink).

The stock chart is awesome... it goes from kinda quiet, to up, to kinda quiet, to up more. Before today's move, the stock popped on an impressive (apparently) earnings release. The stock went from $70.19 the day of earnings (reported AMC) to $82.19 the day after, or a 17.1% rise.

Following earnings there was a bit of a trail higher and then a "quiet" period. In fact, excluding today's move, HV10™ is 20.62% while the long-term historical realized vol hit 43.41% (or more than twice the short-term historical realized vol).

Moving to the implied, we can see how IV30™ was dipping until a couple of days ago. Even at the current level (32.10%), the IV30™ is in the 11th percentile (annual) with a 52 wk range of [27.51%, 70.64%]. The vol comps are currently:

IV30™: 32.10%
HV20™: 22.50%
HV180™: 43.41%

I find it fascinating that the implied is near an annual low given the news and stock movement of late... but then again, that quiet period would be painful if you were long vega.

The Skew Tab snap (below) illustrates the vols by strike by month.

The skew has a normal shape across all three front expiries. To read why skew exists and what "normal" means, you can read this post: Understanding Option Skew -- What it is and Why it Exists. The next earnings release, if it mirrors the last two years, should be outside of Apr expiry and inside the May expiry -- thus the elevated May vol relative to the other expiries.

Finally, let's look to the Options Tab.

Across the top we can see that Apr and May are priced to 30.36% and 36.35%, respectively. This will be an interesting one given the last earnings reaction and the news today.

This is trade analysis, not a recommendation.

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