NDLS

Comps Accelerate and Margins Expand in Chipotle’s Third Quarter

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Image Source: Mike Mozart The once beaten down fast casual restaurant chain Chipotle is back to delivering solid comparable restaurant sales growth thanks to menu price increases, and restaurant level operating margin expanded significantly as lower marketing and promotional spending was required to appease cautious consumers. By Kris Rosemann Simulated Best Ideas Newsletter portfolio idea Chipotle (CMG) reported 8.6% year-over-year revenue growth in the third quarter of 2018, results released October 25, driven by new store openings and a 4.4% increase in comparable restaurant sales. Average check moved higher from the year-ago period due in part to a 3.8% effective menu price increase but was partially offset by a 1.1% decline in comparable restaurant transactions. This weakness in traffic was … Read more

Restaurant Traffic Down, Chipotle Still a Favorite Idea

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Image Source: Chipotle (page 89 of 160) In late April of this year, we added Chipotle to the simulated Best Ideas Newsletter portfolio. By Brian Nelson, CFA We like Chipotle (CMG) for three primary reasons: 1) in CEO Brian Niccol, the company has a new bold visionary at the helm and he is hiring top talent to fill gaps, 2) buyouts in the restaurant space will only offer support for shares as the fast-casual segment remains a key focus area for private equity (here and here), and 3) Chipotle has been plagued with so many health issues (“foodborne illnesses”) in the past that, even with the recent bounce in shares, the market’s expectations are still rather low. Though our fair value … Read more

Restaurant Roundup; Valuations Overcooked

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Image source: McDonald’s Investor Relations page By Kris Rosemann McDonald’s Comps Still Expanding McDonald’s (MCD) continues to believe in the turnaround strategy it implemented about a year ago, and the market appears to be on board as well. The company’s biggest appeal remains its brand recognition, and the above screen grab of its ‘Investor Relations’ page on the corporate site hints that it is well aware of this. Nevertheless, the burger giant has had a solid string of quarters as of late. Global comparable sales in the first quarter of 2016 increased more than 6% from the year-ago period, and US comparable sales grew 5.4% thanks to the broad acceptance of its All Day Breakfast strategy. We were skeptical of … Read more

Earnings Brings Out Volatility of Speculative Entities

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Tesla Falls on Lowered Delivery Guidance Tesla’s (TSLA) shares fell following the release of its second-quarter results August 5, despite beating consensus estimates on revenue and earnings per share. The firm reported non-GAAP revenue growing 40% from the year-ago period to $1.2 billion, and a non-GAAP loss of $61 million or $0.48 per share. The company was significantly cash flow negative through the first half of 2015 due in large part to capital expenditures for capacity expansion and tooling associated with the new Model X and the construction of the Tesla Energy Gigafactory. Management claims its capital spending is more efficient than ever in terms of capital spend per unit of incremental capacity, which will be necessary to get the firm … Read more

Yum! Brands’ Fourth-Quarter Earnings Preview

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Yum! Brands reports after the bell today. Watch Valuentum’s President Brian Nelson on CNBCAsia at 5:40CT. If 16%+ comparable-store sales growth during any given period can ever be described as such, Chipotle (CMG) dropped the ball during its calendar fourth quarter. The fast-casual burrito maker’s shares are facing pressure as a result of management’s overly conservative comp guidance of low-to-mid-single digit growth for 2015, as if we haven’t seen this before. Chipotle sets the bar low and then hurdles over it like an Olympic high-jumper. McDonald’s (MCD), on the other hand, is in a world of hurt, and with CEO Don Thompson’s retirement, the brand has been shaken to the core as it struggles to connect with millennials. Investors in … Read more

The Time to Own McDonald’s Has Passed

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McDonald’s (MCD) CEO Don Thompson’s admission that 2014 was a challenging year is an understatement. The restaurant has been mired in food scandals throughout much of the year, and consumer confidence in the fast food giant has been shaken to the core. McDonald’s sourcing relationship with Shanghai Husi Food, the firm responsible for the mishandling of meat in its China operations, coupled with recent reports of vinyl being found in Chicken McNuggets sold in Japan has given the Dow component a black eye. I talked about McDonald’s on CNBC following its third-quarter report last October, and frankly, the outlook is not much different after its fourth-quarter release. The time to own McDonald’s has passed. It is easy to characterize the … Read more

An IPO That Doesn’t Look Delicious: Potbelly

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After the extremely positive post-IPO fortune of fast food concept Noodles & Co (NDLS), the surging IPO of Potbelly (PBPB) caught our attention. Let’s take a look at the prospects of this Chicago-based sandwich chain. Background Potbelly is a Chicago-based sandwich chain famous for its toasted sub sandwiches, fresh milkshakes, and in-store musical entertainment. The concept began in Chicago’s Lincoln Park neighborhood as a toasted sub shop with eclectic decorations from the original owner’s antique shop. Current chairman and largest individual shareholder Bryant Keil purchased the original restaurant in 1996 and has since worked to turn it into a chain with 286 restaurants throughout the United States—280 owned by the company, and 6 owned by franchisees. The firm also has … Read more

Will Chipotle Serve Breakfast?

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Amid news about the lack of Fed tapering and the launch of Apple’s iPhone 5S (click ticker for report: ), news broke that fast food chain Chipotle (click ticker for report: ) was testing coffee products at one of its Washington, D.C. locations. Naturally, the question arises: is Chipotle going to serve breakfast? Why We Think It’s a Great Idea There’s little doubt that the consistent comparable same-store sales growth from the likes of Panera (click ticker for report: ), Chipotle, and Noodles & Co. (NDLS) suggests that meals eaten outside of the house continue to rise. At the moment, we’re comfortable saying that McDonald’s (click ticker for report: ) possesses the strongest breakfast offering with a mix of inexpensive … Read more

Stock Market Outlook for 2021

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By Valuentum Analysts February 8, 2021 2020 was one for the history books. We covered our thoughts and reflections on the past year in our “2020 Won’t Soon Be Forgotten” article (link here), and now we are looking towards the future. Global health authorities should be able to bring an end to the ongoing coronavirus (‘COVID-19’) pandemic sooner than many had expected as several vaccines have already been improved for emergency use and several others appear increasingly likely to get approved. Global vaccine distribution activities are currently underway, and this should allow the world to slowly return to pre-pandemic activities. Before then, immense stimulus measures launched primarily in developed nations should support global economic activities until the public health crisis … Read more