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Feb 21, 2017

S3 BLACKLIGHT: Panera Bread’s Revenues, Share Price and Shorts are all Rising

The Panera Bread Co. (PNRA US) reported 4th quarter earnings earlier this month with revenues rising to $727.1 million and earnings stronger at $2.05/share. This is the first time Panera reported revenues over $700 million and earnings over $2.00/share. Net profits have been trending downwards since 2013 but seem to be plateauing, and guidance is expecting full year 2017 earnings to be $7.45 - $7.70/share - which would be a 14% increase over 2016 results.

Panera Bread continues to work on operational efficiencies to boost its net bottom line and new store openings to generate growth. The rollout of Panera 2.0, delivery capabilities at some of its stores and app-based ordering is aimed at maximizing sales at its existing stores, especially franchisees which have been underperforming relative to its company-owned brethren. Panera’s stock hit a year to date high of $233.21 after earnings were reported and is trading at $232.39, up 13.31% for the year.

Short sellers have also noticed this recent surge in Panera’s stock price and, when comparing it to Panera’s 16.07% return over the last three years, have driven up short interest over the last week. Panera’s short interest is up 86% on the year and, along with its stock price, is at historical high of $935 million.

Short interest averaged $530 million in 2016 with short sellers down 4.93%, or $26.1 million for the year. With Panera’s stock price rallying in 2017, short sellers have taken a bigger hit this year. Short sellers are down $79.7 million in 2017 for a negative return of 13.30%.

Although Panera Bread has 14 strong buy/buy recommendations out of the 21 analysts covering the stock, its consensus 12 month target price is $245, just 5.5% above today’s price. Short sellers may be looking at this recent rally as a little bit too much too quickly and are looking for a short term reversal to let Panera’s stock price proof at a lower level before continuing its rally. Once Panera’s short interest returns to the $600 million level, the recent momentum short sellers will have bought to cover and either walked Panera’s price down to a support level or were squeezed out as the rally continues.    

For more information on the above analysis, please contact:
Ihor Dusaniwsky, Head of Research, S3 Partners, LLC     Ihor.Dusaniwsky@S3Partners.net
The information herein (some of which has been obtained from third party sources without verification) is believed by S3 Partners, LLC ('S3 Partners') to be reliable and accurate. Neither S3 Partners nor any of its affiliates makes any representation as to the accuracy or completeness of the information herein or accepts liability arising from its use. Prior to making any decisions based on the information herein, you should determine, without reliance upon S3 Partners, the economic risks and merits, as well as the legal, tax, accounting and investment consequences, of such decision.

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