Below is a note from Hedgeye CEO Keith McCullough on why we're adding Cheesecake Factory (CAKE) to the short side of Investing Ideas today:
Now that we're letting them "eat cake"...
Let's focus on shorting Cheesecake Factory (CAKE) on this bounce to the top-end of my risk range.
Restaurants analyst Howard Penney remains The Bear on this one. In his most recent Institutional Research note he wrote:
"It seems clear to us that the management team is more focused on driving incremental margin and only paying lip service to the ability of their business to drive traffic growth. Over the long-term, only the strongest concepts drive positive traffic! CAKE has seen declining traffic for 17 of the last 18 quarters.
On a 2-year stack, traffic has been down 13 of the last 14 quarters. Also important to note, there has been notable deceleration in 2-year trends beginning in 2Q16, and there is no recovery in sight. Saying that A-mall locations are still going strong seems to be an exaggeration about the strength of the mall business."
