Here’s Why Lamb Weston Holdings Stock Jumped 11% In A Week

Lamb Weston Holdings Inc. stock (NYSE: LW) jumped by an impressive 11% in just the last one week, completely outperforming the broader market S&P 500 which declined 2%. If you look at the change over the last one month, LW stock is up 23%. The primary reason behind the stock’s upsurge was a 12% y-o-y growth in the Lamb Weston’s revenues in the recently released Q2 2022 report (quarter ending Nov 28, 2021) due to strong demand from the foodservice segment. The foodservice division, which is the second-largest business segment, generally supplies smaller restaurants. The division’s sales increased 30% during the quarter; 22 percentage points of that was due to volume gains, while the rest came from price increases. Lamb Weston’s larger global division, which supplies the biggest restaurant chains, saw a 9% sales increase, four percentage points of which were due to higher volume and the rest coming from price hikes. The largest restaurants held up well, but smaller ones seem to be starting to come back to life again. This suggests that Lamb Weston is benefiting as the world recovers from the early pandemic hit.

Now, is LW stock set to rise further or could we expect some correction? We believe that there is only a 23% chance of a rise in LW stock over the next month (21 trading days) based on our machine learning analysis of trends in the stock price over the last five years. See our analysis on LW Stock Chance of Rise. To see how LW compares with its peers, see our analysis on Lamb Weston Holdings vs. Lancaster Colony.

• There have been two instances in the last five years when LW stock saw a trailing 21-day rise of 23% or more.
• Given how unlikely such an exception stock price movement is, we looked at the 13 instances where LW stock saw an unusual jump of 20% or more over a 21-day period. 3 of these instances resulted in LW stock rising over the subsequent one-month period (21 trading days).
• This historical pattern reflects 3 out of 13, or about 23% chance of rise in Lamb Weston stock over the next month

Understanding LW Stock Chance Of Rise Under Different Scenarios

Q1: When is it a better time to buy Lamb Weston stock - after a drop or after a rise?

Answer:

Consider two situations,

Case 1: Lamb Weston stock drops by -5% or more in a month

Case 2: Lamb Weston stock rises by 5% or more in a month

LW stock fares better after Case 2, with a 50.2% chance of rise over the next month (21 trading days) under Case 1 (where the stock has suffered a 5% loss over the previous month), versus, a 63.5% chance of rise for Case 2. This would suggest that it is better to buy LW stock after a recent rise

Q2: Does Lamb Weston stock have a higher chance of rise after a steeper drop?

Answer:

Trefis machine learning engine’s calculations show that for most stocks, the chance of rise declines as the drop gets steeper. However, after unusually high drops of -10% or more, there is usually an improvement in the chance of rise. This makes sense intuitively, as markets often overreact to bad news around a company.

For LW stock, the probability of positive returns over the next month (21 trading days) after a drop of N% over the last 21 trading days is detailed in the table below, along with the positive return probability for the S&P500:

Q3: What about Lamb Weston stock chance of rise after a recent rally?

Answer:

LW’s probability of positive returns over the next month (21 trading days) after a gain of N% over the last 21 trading days is detailed in the table below, along with the positive return probability for the S&P500:

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