There was an unusually large call buy in Darden Restaurants(NYSE:DRI)around 10:30 am this morning. A trader purchased 5,000 of the January 2016 $50 calls, at the ask price of $2.65. That puts the total investment value at $1,325,000, a rather big bet on the restaurant chain.
Today, Darden Restaurants (DRI) is trading relatively flat, at $46.36, up 9 cents so far. It’s traded as high as $46.64 and a low of $46.20. It’s not far from it’s 52 week low of $44.78 and has a long way to go to surpass it’s 52 week high of $54.89. This trader clearly is expecting that to happen at some point in the next year and a half. However, from our experience in watching these big unusual options trades, the stock usually pops much sooner than the expiration date the call buyer is in.
TheStreet just lowered it’s rating on Darden, not that TheStreet has any clue what it’s doing. They use some sort of algorithm that spits out useless garbage on every stock out there. They’re algo gets it wrong more often than a monkey, and no, we’re not talking about Jim Cramer.
Darden is profitable and sports a nice yield of 4.75% at the moment which will definitely provide some price support for DRI going forward. In fact, it may be more beneficial for the copy cat trader to buy the common and collect that dividend, and wait for the pop in price down the road.
Over 25 analysts cover Darden Restaurants (DRI) at this time, and the company has a consensus rating of HOLD, with a price target of $50.33. Given the yield, we think it should go higher than $50, and clearly this option buyer thinks (knows) so too.
Darden Restaurants operates a over 2100 restaurants including: Olive Garden, Red Lobster (recently sold though), Longhorn Steakhouses, The Capital Grille, Yard House, Bahama Breeze, Seasons 52, Eddie V’s, and Wildfish Seafood Grille. \
Here’s the 5 day chart on Darden Restaurants (DRI)