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The Nasdaq has been on fire since the March lows and has lead all the equity markets back as it is about 5% from revisiting its all-time high.  When the world economies instituted lockdowns and shelter in place mandates, the stay-at-home stocks like Zoom, Amazon, Microsoft, Netflix, etc. thrived as we all got acclimated to the concept of social distancing.  We also saw the unlikely winners, but no-brainers such as the retailers that sold groceries like Walmart, Kroger and Target thrive too.  But another no-brainer that I didn’t think of was a stock like Papa John.  

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It’s been two years since John Schnatter, the founder and former public face of pizza chain Papa John’s stuck his nose in the national anthem protests debate in the NFL, then indirectly blamed the league for Papa John’s slowing sales. But his biggest public relations mistake came in a May conference call in 2018, Schnatter was asked how he would distance himself from racist groups online. He responded by downplaying the significance of his NFL statement. “Colonel Sanders called blacks n-----s,” Schnatter said, before complaining that Sanders never faced public backlash.

Schnatter eventually resigned and the company went on to spend between $30 million and $50 million the rest of the year on costs related to the scandal, including removing Schnatter from marketing materials and ads and legal costs.

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A year ago, Papa John introduced their newest promoter, Shaquille O'Neal.  Not only is Shaq the new face of Papa John’s, but he is now also the newest board member. Shaq is now featured in commercials and an active investor in nine Papa John’s franchises in Atlanta.  So why did Shaq team up with Papa John, well he wanted to create a better culture…and he loves their pizza. 

Speaking of loving pizza, that’s what many of us did…buy and eat Papa John pizza, while binging on Netflix. 

<blockquote>

The global pizza chain announced for the second straight month that it had notched its best sales growth ever, recording 33% increases in comparable store sales. That comes on top of its previous record of 27% set just last month. Papa John's president and CEO Rob Lynch said the pizza joint already had a tailwind behind it before the coronavirus outbreak, but the nationwide lockdown orders accelerated its growth as it innovated to meet the challenges of the crisis.

Comps surged 35.1% at franchised stores in North America for the period between April 27 and May 24, up from 28.4% between March 30 and April 26. Similarly, comps at company-owned stores were up 28.3% and 22%, respectively. Papa John's saw a massive increase in international sales as well, with comps up 7% in the current period compared to a 1% increase one month ago.

</blockquote>

Now, I love a good pizza pie as well, but Papa John has overachieved and their success as of late isn't part of the "NEw Normal."  As the US economy continues to re-opens, as part of that rotation from Technology to the Cyclicals, you will see a rotation away from the Staples and Grocery chains to Comsumer Discretion and the Dining Out chains.   

Thus, I think Papa John's is setting up for a short trade.  Price just nipped the monthly supply at $88.  So if price can get back to the monthly supply and form some type of reversal pattern, the chart suggest price could decline to the $55 level. 

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This post is my personal opinion. I’m not a financial advisor, this isn't financial advise. Do your own research before making investment decisions.

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