Almost every restaurant stock we monitor surged yesterday. It is important to note the laggards. Of the 40 Restaurant stocks we follow closely, two are down year-to-date: BWLD and GMCR.
All QSR stocks (that we monitor) were up; the average move was +4.8%! Volume for the group, as compared to the 30 day average, was also up albeit due to exceptional volume seen in trading of RUBO. RUBO agreed to be acquired by private-equity firm Mill Road Capital LP for about $91 million. In casual dining, stocks moved an average of 4.3%. DIN, BOBE, and RT were the notable outperformers, posting strong gains on strong volume. Notably, BWLD and KONA posted declines.
I see the down move in BWLD, in the face of such a strong intra-day market, as particularly telling and supportive of my view that is running a model that has lost sustainability. I wrote in detail on this point in 4/28 in a note entitled, “BWLD – IT ALL COMES BACK TO ‘SUSTAINABILITY’”. Interestingly, BWLD was upgraded to buy from neutral today. CAKE was also upgraded from neutral to outperform.
Howard Penney
Managing Director