Traders Could Try to Buy This Stock at $71 with a Trading Target of $81

Yum! Brands, Inc. (NYSE:YUM) — This company franchises, operates or licenses the largest number of fast-food restaurants in the world operating in over 125 countries. More than 41,000 units, which include Pizza Hut, KFC and Taco Bell, are among its most recognizable brand names.

In early February, Standard & Poor’s Capital IQ raised its opinion on YUM from “Buy” to a “Five-Star Strong Buy” based on its re-organization following the spin-off of its China operation in October 2016.

Despite an estimated 11% cut in revenues in 2017, S&P projects that global system-wide same-store sales growth of 2% to 3% will result in a “sizable expansion” of margins to over 31% in 2017.

They remain the worldwide leader in store openings at six new restaurants per day.

S&P forecasts 2017 EPS of $2.76 and $3.12 in 2018.

Their 12-month target price of $78 is based on a price-to-earnings ratio of 28.6X their 2017 estimate and under 26X their 2018 estimate.

YUM pays an annual dividend of $1.20 for a 1.7% dividend yield.

Technically, YUM stock resumed its powerful bull market in March 2016, following a correction from a high of $69 in May 2015 that resulted in a decline of 33%. The subsequent advance has tracked the stock’s 200-day moving average since mid-2016.

Last week, YUM broke a double top at $69, which completed a saucer formation. The break was supported by higher-than-average volume and above-average accumulation that began in February. This formation is extremely bullish and on this chart appears to add a new leg that could add another $10 to $12 to the advance. Thus traders could try to buy YUM at $71 with a trading objective of $81 for a projected return of 14%.

— Sam Collins, Trade of the Day

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Source: Investor Place