Options Trade – Cheesecake Factory Inc (NASDAQ:CAKE) Calls 
Friday, January 09, 2015

**OPTIONS TRADE: Buy the CAKE Apr 2015 50.000 call (CAKE150417C00050000) at or under $3.80, good for the day. Place a protective stop loss at $1.50 and a pre-determined sell at $6.50.

by Ian Harvey

January 09, 2015

Introduction

The restaurant sector has seen some positive movement lately, particularly with the decrease in gas prices, however, many components remain under-loved – which means that this lingering pessimism, juxtaposed against stellar price action, provides plenty of future potential sideline cash to fuel additional gains.

One such company that fits into this category is Cheesecake Factory Inc (NASDAQ: CAKE), which is engaged in the restaurant and bakery businesses, having provided some record highs, is still lacking analysts’ support. This week Morgan Stanley has hiked the price-target hike to $50 from $42 which has given the company a boost. Again, though, the new target sits south of CAKE's current perch, as does the average 12-month price target of $48.53. What's more, despite outperforming the broader S&P 500 Index (SPX) by more than 8 percentage points during the past month, CAKE boasts just five "strong buys," compared to 13 "hold" or worse ratings. More upwardly revised price targets or a round of upgrades should lure buyers to the table and help complete this recommended options target.

Technical Details

The stock has a 50-day moving average of $48.73 and a 200-day moving average of $46.21. The company has a market cap of $2.464 billion and a P/E ratio of 23.78.

The Cheesecake Factory Incorporated is performing above average with a weekly performance of 4.19%, a quarterly performance of 15.06%, comparatively a 52 week low of 25.27% with a dividend yield of 1.26%, and a total debt to equity ratio of 0.05. The Cheesecake Factory Incorporated (CAKE)’s monthly performance stands at 7.99% with a profit margin of 5.60%.

Earnings

Cheesecake Factory last issued its quarterly earnings data on Wednesday, October 22nd. The company reported $0.48 EPS for the quarter, missing the Thomson Reuters consensus estimate of $0.57 by $0.09. The company had revenue of $499.10 million for the quarter, compared to the consensus estimate of $498.00 million.

During the same quarter in the prior year, the company posted $0.52 earnings per share. The company’s quarterly revenue was up 6.3% on a year-over-year basis. On average, analysts predict that Cheesecake Factory will post $2.10 earnings per share for the current fiscal year.

Analysts Opinions

Analysts at Bank of America upgraded shares of Cheesecake Factory from an “underperform” rating to a “neutral” rating in a research note on Wednesday. They now have a $53.00 price target on the stock. Bank of America believes that Cheesecake Factory is in a position to benefit from low dairy prices.

The company has also been the subject of a number of other research reports:-

• Analysts at Jefferies Group reiterated a “hold” rating on shares of Cheesecake Factory in a research note on Tuesday. They now have a $50.00 price target on the stock, up previously from $43.00.

• Finally, analysts at Zacks reiterated a “neutral” rating on shares of Cheesecake Factory in a research note on Tuesday, December 9th. They now have a $51.00 price target on the stock.

Therefore, based on the facts above the following options trade is recommended…..


**OPTIONS TRADE: Buy the CAKE Apr 2015 50.000 call (CAKE150417C00050000) at or under $3.80, good for the day. Place a protective stop loss at $1.50 and a pre-determined sell at $6.50.



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