In his first Executive Decision segment of last Thursday's "Mad Money" program, host Jim Cramer spoke with Rob Lynch, president and CEO of pizza chain Papa John's International Inc. (PZZA) .
Lynch said Papa John's is very much a turnaround story and its teams have been hard at work creating new products and new messaging that helped attract more than two million new digital customers in the second quarter.
When asked about the pandemic, Lynch noted that Papa John's plans didn't change when Covid-19 hit, they only accelerated. Papa John's has been doing its part to help displaced workers as it recently hired more than 20,000 employees. It also has increased employee benefits to include telemedicine.
Turning to the topic of growth, Lynch noted that despite being among the top three pizza chains in the country, Papa John's still has just half as many locations domestically as its larger competitors.
Let's check out the charts and indicators of PZZA.
In this daily bar chart of PZZA, below, we can see that prices have been making new highs for the move up since late April. The late February to mid-March selloff cut the stock price in half, but a V-bottom quickly turned things around. Prices are above the rising 50-day moving average line and above the rising 200-day moving average line. Trading volume has been more active since late February and the On-Balance-Volume (OBV) line shows a bullish rise from March. A rising OBV line tells us that buyers of PZZA have been more aggressive than sellers. The Moving Average Convergence Divergence (MACD) oscillator has been above the zero line since late April.
In this weekly bar chart of PZZA, below, we went back five years to show the large reversal pattern. Prices made a large saucer-like bottom/reversal pattern that bottomed out in 2018-2019. We can see the recent upside breakout to new highs. Prices are above the rising 40-week moving average line. The weekly OBV line is very bullish and tells us that buyers have been more aggressive since 2018 and not just since March of this year. The MACD oscillator is bullish and pointed higher.
In this daily Point and Figure chart of PZZA, below, we can see a potential upside price target in the $115 area.
Bottom line strategy: Risking a close below $90, trade PZZA from the long side. The $115 area is our first upside price objective.