Overall, sticky inflation and a rising unemployment rate suggests that consumers may be getting burned out. Traders are keeping a close eye on consumer trends to avoid a danger from any slowdown in their spending, which makes up a majority of the economy.
Consumer spending comes in all shapes and sizes, from cruises and vacations to pricey home goods and automobiles. For lower-income Americans, dining out is a key indicator.
The good news? That trend looks strong. Restaurant operator Darden (DRI) just raised its full-year forecast as sales have been growing across its portfolio of brands, in particular LongHorn Steakhouse.
Darden’s forecast raise caused shares to jump 15% to an all-time high. However, with shares only now up about 9% over the past year, there’s likely still more room to run in 2025.
Plus, at current prices, Darden trades at about 17 times earnings, a notable discount to the overall market. If consumer spending on restaurants continues strong, it should justify a higher multiple.
Action to take: Investors may like shares here for growth at a reasonable price, and to play the current market momentum in the stock. Darden also pays a solid 3.5% dividend at current prices.
For traders, the April 2025 $200 calls, last trading for about $5.40, could see mid-to-high double-digit returns on a continued rally through the spring.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any company mentioned in this article.