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JPMorgan said the US will reopen on July 4 and restaurants are ready to benefit from a desire to ‘go out and get together’.


JPMorgan analysts say with the US set to reopen in Independence Day, restaurants are poised to benefit from the pent-up desire to have a picnic, which has been constrained by the COVID-19 pandemic.

Analysts wrote in a note focusing on the restaurant industry released on Monday: “Although a year behind previously expected, we still believe that July 4 will be big. represents the reopening of America.

JPMorgan relies on a reopening forecast based on the progress the country has made so far in repelling the pandemic.

“With about 40% of Americans getting at least one shot and getting about 3 million shots a day, the herd’s immunity is likely to happen as early as June,” the report said.

See: Will you give your children COVID-19 vaccine when they qualify? Only half of US parents say yes

Herd immunity occurs when 50% to 90% of the population become immune to viruses. Medical experts have said that the vaccination’s rate 70% to 80% can bring the nation closer to herd immunity.

However, Dr. Anthony Fauci, President Biden’s main medical advisor, advised in the process White House press conference on Monday It’s best to focus on getting as many people vaccinated as possible rather than just any specific number.

JPMorgan analysts note that restaurant seating capacity in major locations ranges from 25% in California, to 50% in New York City, and 50% in Pennsylvania and Illinois. Florida and Texas “are now largely back to capacity.”

Analysts emphasized sales in March, which were down only 4% from 2019, and that for the first week of April, sales were up 1% year-on-year.

Also: ‘Terrible’ sales expectations from consumer companies as the COVID schedule closes

The unprecedented stimulus and lack of consumer spending alternatives have resulted in a larger $ 2.5 trillion increase in savings and what, the analysts wrote. We believe a great need is compressed to “get out and collect”.

Among the fast-service names, Wendy’s Co.
WEN,
-0.09%

has increased “noticeably”, McDonald’s Corp.
MCD,
+ 0.16%

is a safe bet and Domino’s Pizza Inc.
DPZ,
+ 1.10%

“Still a secular winner,” said the analysts.

JPMorgan also named Chipotle Mexican Grill Inc.
CMG,
-0.11%

and Shake Shack Inc.
ALREADY,
+ 3.38%

for their growth potential.

Analysts found room for 6,000 Chipotle locations in the US with 25% margins and $ 20 billion in sales, and forecasts $ 2.5 billion in revenue at 850 Shake Shack locations, plus 1,200. Licensed locations in the US and abroad.

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JPMorgan, which has a neutral Chipotle stock rating with a December 2022 price target of $ 1,460, is not the only research group that is optimistic about Chipotle.

Raymond James analysts upgraded Chipotle to outperform market performance in a note on Monday, setting a price target of $ 1,800.

“We believe the company’s sales have been fully involved in reinforcing industry trends over the past four weeks, potentially pushing average recent weekly sales (AWS) beyond 50,000. dollars, ”wrote analysts led by Brian Vaccaro.

And UBS analysts say the same restaurant’s sales dynamics over two years will be supported by improvements in areas like menu and digital innovation.

“Pretty big expectations surround the lead launch quesadillaand UBS Evidence Lab app data showing an increase in download sharing requests. around the launch date (digital only) and at least 22 weeks, ”UBS said.

“We consider Chipotle to be one of the most durable QSRs [quick-service restaurants] on the impact of COVID, but can also see benefits from reopening and increased mobility. “

See: Chipotle goes one step further to achieve its margin target with steak price increases: Truist

UBS has a neutral rating on Chipotle stock with a price target of $ 1,575.

Up to now, Chipotle shares have risen nearly 11% and nearly doubled, up 95.8% over the past year.

S&P 500 benchmark index
SPX,
+ 0.33%

increase by 10.3% until 2021.



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