Harriet Lefton

About the Author Harriet Lefton

Harriet originates from the UK where she worked as a journalist specializing in the metal markets. She graduated from the University of Cambridge before becoming a qualified UK lawyer.

The Heart of Wall Street (Thursday Edition): Buffalo Wild Wings (BWLD), Amazon.com, Inc. (AMZN), and Chipotle Mexican Grill, Inc. (CMG)

A glimpse into three of today’s most intriguing news.

Buffalo Wild Wings (NASDAQ:BWLD) shares are soaring nearly 18% in Thursday’s trading session. With the release of its third quarter earnings results, the chicken wings specialist revealed a sizeable uptick in profit after it used boneless wings in one if its key promotions. Following a prolonged period of struggling sales, this time around profit came in close to 50% above expectations.

Buffalo Wild Wings had been flailing after it ramped up prices for its signature dish: chicken wings. Indeed, the company’s CFO Alexander Ware calculated that prices were 26% more expensive than last year. This works out at an increase of $2.16 a pound. In order to combat the decline, the company decided to introduce a buy-one-get-one-free deal on boneless chicken wings one day a week. This was a risky move as it replaced the company’s popular half price Tuesday wing offer, but the figures show that this has paid off. Although sales decreased, the offer is much cheaper for BWLD to run and therefore is much more profitable.

“The recent Tuesday promotion shift from traditional to boneless wings at company-owned restaurants will continue to improve cost of sales while traditional wing prices remain elevated,” commented BWLD’s CEO Sally Smith- who is due to retire by the end of the year perhaps due to a relentless activist hedge fund campaign.

For the quarter, the company’s same-store sales dropped by 2.4% in the quarter with revenue of $496.7 million vs the expected $501 million. However profit rose to $1.36 a share on an adjusted basis. This works out at over double the prior quarter and up 10.5% on a year-over-year basis.

“We were surprised by the lack of a guidance cut. This is causing the stock to rally back to levels prior to last quarter’s guide down. We elect to wait to pitch stock’s investment case until we get more comfortable with Street’s strong ’18 earning growth assumptions and we gain better visibility on who new leadership will be and their strategic goals” comments top Oppenheimer analyst Brian Bittner. He has a buy rating on the stock and bullish $135 price target.

In total, Buffalo Wild Wings has a cautiously optimistic Moderate Buy analyst consensus rating on TipRanks. In the last three months this breaks down into 4 buy and 10 hold ratings. We can see that the average analyst price target of $124 suggests a 23% upside from the current share price.

The e-commerce giant Amazon.com, Inc. (NASDAQ:AMZN) has just received a rare bearish report from Goldman Sachs ahead of its third-quarter results release post-close today in respect of its guidance for the current fourth quarter.

“Investor focus remains on operating income with the view that guidance is likely to fall below sell-side consensus of $1.5bn,” says top Goldman Sachs analyst Heath Terry. This is a top analyst according to TipRanks, where he is ranked #276 out of over 4,700 tracked analysts. And on Amazon stock specifically, Terry has an impressive 80% success rate and 25% average return.

“We expect the company to guide total revenue +26-34% yoy with $0mn to $1.0bn in GAAP operating profits, as guidance factors in the Whole Foods acquisition, [Amazon Web Services] growth accelerates modestly on an 800bps easier comp, and both revenue and expenses reflect the investments in new fulfillment centers and AWS regions,” says Terry.

However, on the positive side, Terry believes that the market is “underestimating the potential for organic growth reacceleration as the ~70% growth in infrastructure spend (CapEx and Capital Leases) over the TTM begins to deliver returns and AWS comps ease.” He has a buy rating on the stock and $1,275 price target (31% upside from the current share price). Overall, Amazon has a ‘Strong Buy’ consensus rating on TipRanks with 30 buy ratings and only 2 hold ratings in the last three months. Meanwhile the average analyst price target stands at $1,201 (23% upside potential).

Mexican food chain Chipotle Mexican Grill, Inc. (NYSE:CMG) has struggled following the release of disappointing third quarter earnings results- and now the market is wondering whether the company will forever be haunted by the food contamination issues of the past.

While it is true that 2017 same-store sales were up 8.3% with gains in each of the last three quarters, the earnings still failed to meet low expectations. And even more worrying is the fact that Chipotle has also lowered its guidance going forward- the company cut both its 2017 full-year same-store sales target and its 2018 unit sales growth and new store guidance. CMG’s third quarter operating EPS was $1.33 vs the consensus of $1.62, with revenue of $1.128 billion far below the Street estimate going into the print of $1.136 billion.

Following the news, even the bullish analysts slashed their price targets on the stock. Five-star Credit Suisse analyst Jason West says, “recovery remains elusive,” and cut his price target from $320 to $275, which translates into a marginal downside from the current share price. He has a hold rating on the stock. He concludes that: “despite some sales lift from queso and pricing, we view this result and outlook as disappointing, particularly for those looking for a more meaningful recovery following multiple food safety events… traffic looks increasingly vulnerable, esp. if the current lift from queso were to fade.”

Indeed the main positive for BTIG’s Peter Saleh is that “depressed sentiment and less obvious downside keep us from becoming more negative.” He has a neutral rating on the stock but is keeping a close on eye on the troubling reduction in unit growth. Overall, TipRanks reveals that Chipotle has a Hold analyst consensus rating. In the last three months this breaks down into 5 buy, 19 hold and 3 sell ratings. These analysts have an average price target on the fast food chain of $319 (15% upside from the current share price).


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