Darden Restaurants reports its next earnings on June 25 with options traders displaying the most defensive positioning seen in months, even as the stock has rallied sharply and analysts continue to lift targets.
The options market is flashing a clear warning. The put/call ratio jumped to 1.35 on June 18 — more than three standard deviations above its 20-day average of 1.23, and the highest reading since mid-May. That z-score of 3.4 is unusual for a stock that has gained 10% over the past month to close at $213.45. Investors are buying downside protection at an accelerating rate even as the price climbs. The lending market, by contrast, is loose — availability runs at 703%, meaning there are roughly seven shares available to borrow for every one already shorted. Cost to borrow has ticked up 45% over the past week to 0.63%, but remains firmly in "easy borrow" territory. Short interest itself has edged down 6% over the past month to 5% of the free float, with no sign of an aggressive build from bears in the lending pool.
The analyst debate has a clear tilt. Citigroup raised its target to $245 last week, while BofA Securities — which pushed to $276 earlier this month — remains well above the Street consensus of $226. Both hold Buy-equivalent ratings. Stephens and Wells Fargo sit at hold-equivalent with $210 targets, effectively flagging that the stock has reached fair value on their models at current levels. The bull case centres on brand momentum at Olive Garden and LongHorn, effective cost management, and EPS estimate revisions that rank in the 93rd percentile over 30 days. The bear case is more macro than company-specific: consumer spending durability at mid-price dining, competitive intensity, and the risk that unit growth introduces execution friction. The PE multiple has compressed slightly over the past month to around 17.9x, while EV/EBITDA eased to 13.7x — valuation is not stretched by casual dining standards, but the stock is no longer obviously cheap.
The most recent comparable earnings reaction is instructive. The March 26 print produced a one-day drop of 4.5%, with the stock still down 2.6% five days later — a notably cooler reception than the prior quarter's modest gain. Peers have broadly kept pace this week: TXRH rose 6% on the week and BJRI gained 5%, while DRI added just 1.2%, suggesting DRI has underperformed its restaurant peers in the immediate run-up to the print.
Thursday's release is therefore less about whether Darden is growing and more about whether the pace of same-store sales at Olive Garden and the margin profile on new unit openings can justify a stock that has re-rated 10% in a month while options traders hedge at their most defensive in weeks.
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