Restaurant Consumer Services Play - BUY Recommendation!
The major indices are mixed at midday following an active morning session on Wall Street, with the bullish Nasdaq decoupling from the weaker Dow and S&P 500. While the Dow remains stuck below its 50-day moving average following yesterday's dip, the Nasdaq got close to its all-time high once again thanks to this morning's rally in the tech sector. Financial markets turned volatile overnight in the wake of the Fed's unexpected shift, as the dollar surged to a fresh two-month high while commodities, especially copper and precious metals suffered a major hit. The Treasury market is having a tumultuous session due to the Fed's announcements, but while short-dated yields rose further, the long end of the yield curve has been pushing lower today. This likely means that some investors are betting on a premature rate hike by the Fed, which could weigh on the long-term growth outlook for the U.S.
Stock Pick Summary:
Our portfolio continues to outperform the market significantly and we continue to diversify aggressively. Today's business is a well known restaurant chain that you ought to have visited and will likely keep visiting. The company clearly suffered in late Q1 and early Q2 2020 as consumers were locked down during quarantine for almost a year. As travel picks up pace and travelers go for road trips or even at the airports, they will be looking to grab some food. In that sense, one of America’s favorite fast-food stops will be in high demand this year. Not just that, but being a global brand, it will also benefit from the global reopening, which is lagging behind the U.S. a bit. The U.S. reopening should give the company a strong boost, but the global reopening should help create sustained growth in the future. The growth strategy announced last November commits to focusing on burgers, chicken, and coffee, the three pillars that have driven sales to over $20 billion annually. Analysts expect 16.5% revenue growth this year to go along with more than 40% earnings growth. In 2022, estimates currently call for double-digit earnings growth again, to $9.55 a share. We expect that its sharp focus on digital, deliver and drive-through will enable customers to order remotely and choose their most preferred option, enabling it to outperform competition. Not to forget, if offers a nice 2.20% dividend, while we see this long term pick serve us over the next 5-10 years!
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