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DNKN was shorted this afternoon in the Hedgeye Virtual Portfolio.

DNKN is performing strongly today, up around 2% as we head towards the close.  Keith shorted the stock based on his quantitative model but we also remain bearish from a fundamental perspective.  We believe that the stock is egregiously overvalued, as we wrote on 8/22.  Investors buying DNKN today are paying a steep premium to SBUX, MCD, and YUM.  We do not believe that is a good deal!  Within the QSR space, only GMCR and CMG are awarded richer multiples by the Street. 

There are two events tomorrow that we think you should be aware of.  First, the Street initiates coverage tomorrow so we anticipate quite a lot of interest in the name (on a relative basis, of course, given the holiday weekend).  Second, we are catching up with the management team tomorrow in order to learn more about their growth strategy and other aspects of the business.  We will be posting any important takeaways from the call.

As the chart below shows, the immediate-term TRADE lines of support and resistance are $25.03 and $27.11, respectively.

DNKN: TRADE UPDATE - dnkn levels


Howard Penney

Managing Director

Rory Green