$7.0 Billion for Impossible?
We are hosting a BYND Black Book on 11/2 @ 10 am.
BYND is currently trading at $6.3B EV, and we believe it should be 50% lower, while Impossible wants a $7.0 billion valuation. How is that? IF BYND trades at 5x NTM sales the stock is $55 or 44.5% downside!
According to Bloomberg, Impossible Foods Inc. (IMHO has a better burger) is in talks to raise about $500 million at a valuation of $7 billion. Founded in 2011 by Chief Executive Officer Pat Brown, Impossible Foods touts the same story as BYND on its reliance on fewer environmental resources (such as land and water) than necessary to produce meat. In August 2020, Impossible raised $200 million in a round led by Coatue Management LLC that included participation from XN Capital. That came about five months after the company said it raised about $500 million in a round led by Mirae Asset Global Investments, with Khosla, Horizon Ventures, and Temasek. Other existing investors include Qatar Investment Authority, London Impact Ventures, billionaire Bill Gates, singer Katy Perry, and Serena Williams' Serena Ventures.
Texas RoadHouse
TXRH is a SHORT
TXRH reports 3Q21 EPS $0.75 missing FactSet $0.81 with comps +30.2% below FactSet +31.9%. Restaurant margin missed by (90bps) and operating margin missed by (100bps) with the cost of sales +120bps higher than expected. I have never seen an inflation number like this in all my years covering the industry. "Food and beverage costs as a percentage of total sales were 34.6% for the third quarter. COGS was 242bps higher than the prior-year as a higher-than-expected increase in beef prices during the back half of the quarter drove total commodity inflation to 13.9%. Commodity inflation was approximately 10%, 15%, and 16% for our July, August, and September periods, respectively."
Same-store sales (company-owned) restaurants for the first four weeks of 4Q21 increased 22.6% and 23.6% compared to our 2020 and 2019 periods, respectively. In addition, the company implemented a menu price increase of 4.2%. The FY22 outlook: expects positive comp restaurant sales growth; 25-30 Texas Roadhouse and Bubba's 33 company restaurant openings; store week growth of 5%-6%, excluding the impact of potential franchise acquisitions; commodity cost inflation in the high teens in 1H22; wage and other inflation of ~6%; an effective income tax rate of ~15% excluding the impact of any legislative changes enacted; total CAPEX of ~$230M including as many as six relocations.
There could be as much as a 25% downside to TXRH as it trades down to 1.25x NTM sales.
SBUX Earnings
On our 4Q21 Themes deck, we removed SBUX from the LONG list.
SBUX reported an ok quarter and projected revenue between 32.5B and 33.0B in FY22 vs. a consensus of $32.1B. EPS will be up "at least 10%" from the $3.10 mark in FY21 or $3.41+ vs. consensus of $3.71. To support the ho-hum quarter, it re-institutes its share repurchase program and will return $20B to investors over the next three years through share repurchases and dividends. Performance accelerated throughout the quarter, and the company expects continued growth as urban U.S. stores have reached sales at or above pre-pandemic levels. CEO Kevin Johnson believes that there remains room for Starbucks to raise pricing, noting that there is "more upside power in price if needed" as consumer demand remains "strong." Noting a 7% decline in China's same-store sales, Starbucks' "recovery momentum was below expectations." The COVID-19 restrictions in mid-August impacted around 80% of stores in China. Locations in tourist zones and cities with large numbers of COVID cases were particularly affected. Leo Tsoi, the COO of Starbucks China, expects sales to recover quickly, calling the problems "short-term." Management said that staffing challenges were present but didn't sound too concerned. They cited the coffee chain's ability to shift employees to different locations and adjust store hours as needed. Summary Stats:
- Adj. EPS $1.00 (beat)
- Revs $8.15B vs. $8.2B (miss)
- Global comps +17% vs. +18.3% (miss)
- US comps +22% vs +23.4% (miss) - US comp 2-year stack +11%
- Intl. comps +3% vs +4.1% (miss)
- China comps -7% (big miss)
- 24.8M rewards members, up 28% YoY
