Restaurant stocks are experiencing one of the highest volatility in the stock market today. The shutdown of many restaurants across the globe, more specifically in the U.S. has created a steep decline in economic activities. It is not surprising that the food & beverage stocks, along with travel stocks and hospitality stocks are taking a big hit. We have witnessed a few public companies in the affected sectors seeking bankruptcy protection. Shareholders’ assets are wiped, jobs are lost as a result of the coronavirus pandemic.
Just yesterday, shares of Dave & Buster’s Entertainment (PLAY Stock Report) plunged 26.4% after investors panicked about the possibility of the company filing for bankruptcy. The company’s business model of mixing food and entertainment, in the form of video games, was the competitive edge of the company’s offerings. But when the pandemic strikes, Dave & Bust business came to a virtual halt. In the event the company fails to renegotiate the loan term with its lender, it could face an existential threat. Let’s face it, the services industry wasn’t exactly thriving before the coronavirus pandemic.
But hey, not all hope is lost. With Abbott Labs (ABT Stock Report) mass producing a $5 rapid COVID-19 test, investors began to feel more hopeful about this battered industry. Since not all restaurants are created equally, some are performing better than the others. In fact, companies whose business model relies heavily on delivery benefited the most despite the pandemic. This business model proves to be resilient with or without the pandemic. That said, do you have these top restaurant stocks on your watchlist?
- Looking For Tech IPOs To Buy This Week? 3 To Focus On Other Than Snowflake
- Top Biotech Stocks To Watch In Q4 2020
Domino’s Pizza (DPZ Stock Report) has been one of the best restaurant stocks to watch in the market. Admittedly, it is probably better known for its delivery than its restaurants. Domino is implementing a “long-term playbook” that could potentially extend the brand’s success. With menu and technological innovation, expanded value offerings, and more advertising spending, DPZ stands a good chance to continue to enjoy high growth.
The company reported a set of strong second-quarter results earlier this year. The company recorded almost $120 million in net income through the first half of 2020. This presents a 13% increase over 2019. Year-to-date, DPZ stock has increased by more than 34%. If you have been a long-term shareholder, you would be glad to know that since 2009, the shares have gone up about 46 times. That’s staggering to think of it. DPZ stock has even put some of the biggest tech names to shame. While pizzas don’t always sound exciting, the company can certainly reward investors in the years ahead.Best Restaurant Stocks To Watch In 2020: Chipotle Mexican Grill
Next up, Chipotle Mexican Grill (CMG Stock Report) has been one of the best restaurant stocks to watch in the stock market. Of course, the fast-casual chain is not immune to the pandemic. It recorded a negative sales growth of 4.8% during the second quarter. But the company’s digital strategy proved to be working well. So well, in fact, that digital sales growth rate was at 216.3%. As of the end of the second quarter, the company had $935 million in cash and cash equivalents on its books and no debt.
Chipotle has bounced back strongly from the coronavirus market sell-off in March. It’s no question that Chipotle has been one of the big winners for investors who put their money into the company during the food crisis. Investors like to compare Chipotle to Domino’s Pizza. Maybe that’s because both companies have performed well during the pandemic. However, the biggest concern about CMG stock isn’t its business prospects. But its valuation is now at a sky-high PE ratio of 126 more common among high-flying tech stocks. Of course, such valuation suggests that shareholders are having a lot of expectations in the company. Nevertheless, there could still be a real upside potential here.Best Restaurant Stocks To Watch In 2020: McDonald’s
McDonald’s (MCD Stock Report) which has one of the strongest brands globally, operates more than 38,000 restaurants in over 100 countries. Shares of McDonald’s have recently climbed above to positive territory after the pandemic-induced sell-off in March. Many analysts are also increasingly bullish on MCD stock. This is a signal that now could be a good time to buy this restaurant stock.
About 90% of the McDonald’s chains are currently franchised. These franchisees bear all the operating costs and business risks. Therefore, McDonald’s does not have to worry about the expenses of running those operations. What’s more, the company earns rent from the franchisees. Perhaps you may say that McDonald’s is a real estate business as much as it is a fast-food company. With MCD stock hitting all-time highs this week, investors are beginning to pay more attention. And if you are looking for a dividend stock to buy, MCD stock could be a good candidate too. It kept its dividend steady during the pandemic. With over 25 years of rising dividends, it is not surprisingly a stalwart among the dividend aristocrats.