Trading Buffalo Wild Wings' April 24 Earnings Call

Apr.19.12 | About: Buffalo Wild (BWLD)

Buffalo Wild Wings (BWLD) is one of those under-the-radar stocks that has provided large price moves when reporting quarterly earnings. It is one of my favorite companies to look forward to when earnings season rolls around. I see the possibility that this stock can really breakout if it delivers positive results.

I first visited a Buffalo Wild Wings restaurant in 2002. I enjoyed the atmosphere and still remember mentioning to my brother that this company was going to seriously grow. That being said, anyone who has read my previous articles knows I never take one side on an earnings trade. It is too risky and it becomes pure gambling, which is what I try to avoid.

In this article, I will show you how Buffalo Wild Wings' stock has performed right before reporting earnings and immediately following the release and what strike prices (using stock options) I will be using to place this trade.

Buffalo Wild Wings engages in the ownership, operation, and franchising of restaurants primarily in the U.S. The company offers chicken and various food and beverage items, as well as serves bottled beers, wines, and liquor. It operates its restaurants under the Buffalo Wild Wings Grill & Bar brand name. As of Feb. 7, 2012, the company had 827 Buffalo Wild Wings locations across 47 states in the U.S., as well as in Canada.

Currently, Buffalo Wild Wings is trading at $84.51 a share. The 52-week range is $52.37-$94.81.

  • 52-week high: 94.81
  • 52-week low: 52.37
  • EPS: 2.73
  • P/E: 30.60
  • Div Rate: N/A
  • Yield: N/A
  • Market Cap: 1.55 billion
  • Volume: 502.32 k

Here is a closer look at how Buffalo Wild Wings has performed over the last four quarters.

On Feb. 7, 2012, Buffalo Wild Wings reported its fourth-quarter earnings. The stock saw the following price movement:

Date Open High Low Close Volume
Feb 8, 2012 80.95 82.46 78.82 82.19 6,592,200
Feb 7, 2012 68.85 70.91 68.08 70.19 2,223,804
Feb 6, 2012 68.75 69.48 68.36 68.88 1,214,919
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On Oct. 19, 2011, Buffalo Wild Wings reported third-quarter earnings. The stock saw the following price movement:

Date Open High Low Close Volume
Oct 21, 2011 63.10 63.94 61.81 62.88 842,045
Oct 20, 2011 60.21 62.73 59.29 62.18 2,254,003
Oct 19, 2011 58.00 58.00 58.00 58.00 838,400
Oct 18, 2011 58.37 58.72 56.72 58.53 552,008
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On July 26, 2011, Buffalo Wild Wings reported their second-quarter earnings. The stock saw the following price movement:

Date Open High Low Close Volume
Jul 28, 2011 64.77 65.50 63.83 64.22 453,606
Jul 27, 2011 64.97 64.97 64.97 64.97 1,596,000
Jul 26, 2011 67.10 67.87 64.97 65.25 884,838
Jul 25, 2011 67.08 67.92 66.52 66.83 461,512
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On April 26, 2011, Buffalo Wild Wings reported its first-quarter earnings. The stock saw the following price movement:

Date Open High Low Close Volume
Apr 28, 2011 61.31 62.29 60.11 61.82 501,583
Apr 27, 2011 59.26 59.26 59.26 59.26 770,000
Apr 26, 2011 60.48 61.21 60.28 60.44 669,547
Apr 25, 2011 60.05 60.79 59.52 60.25 171,229
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If there is one thing that is concerning, it is that the stock is nearing its 52-week high. However, as I mentioned earlier, this stock could really pop upward. It is starting to get a lot more attention, and this brings liquidity. The stock has a price-to-earnings ratio of 30.96.

I am choosing to play this trade with as little of an investment as possible. Therefore I will be using a "strangle" option strategy. A strangle is when a trader buys both out-of-the-money call and put options, using the same expiration. I always buy at least one month (sometimes longer) forward so that time-decay does not affect the premium with the options.

It is important to note that I am not necessarily expecting the stock to reach the strike prices I have chosen. Rather, I am expecting the share price to make a large enough of a price move to have the trade be profitable. I will usually sell when this is the case the next day after the company releases earnings. If the stock price should hit the strikes I have used, all the better.

I will be purchasing June 2012 $100.00 strike prices and June 2012 $70.00 strike prices early next week.

If you have any questions, please leave a comment or send me an email.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in BWLD over the next 72 hours.