Lodgings/Restaurants/Bars – Page 2

Cava Group’s stock soars 11% as analysts start coverage on a bullish note

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The stock of Mediterranean-style fast-casual restaurant chain Cava Group Inc. soared 11% Monday, after analysts initiated coverage on the stock which made its debut on public markets in mid-June with a flurry of buy ratings.

At least four of the banks that were underwriters on the initial public offering — JP Morgan, Stifel, William Blair and Jefferies — assigned the stock a buy rating or the equivalent.

FactSet shows one bank has a hold rating but it’s a restricted listing so it’s not clear who it’s from.

The company
CAVA,
+8.04%
raised $317 million in its initial public offering, which priced above its proposed range at $22 a share and immediately rallied on opening. The company issued 14.4 million shares at a valuation of $2.45 billion. The stock was last trading at $43.83.

The company is not profitable and has high cash burn and just $23 million in cash and cash equivalents on its balance sheet, according to its IPO filing documents.

But analysts were unfazed, with William Blair analysts calling it a clear leader in a fast-growing category with proven geographic appeal.

“CAVA has hit upon a winning formula with its customizable menu of bowls and pitas featuring bold Mediterranean flavors that can fit in any dietary preference,” wrote analysts led by Sharon Zackfia.

“CAVA’s customer appeal is evident in average unit volumes (AUVs) of roughly $2.5 million and a 44% five-year revenue CAGR through 2022.”

The company accelerated its growth with the 2018 acquisition of Zoës Kitchen, “which provided immediate access to attractive real estate in new markets while enabling capital-efficient densification in top-tier trade areas (Zoës conversions roughly half the cost of a typical greenfield CAVA),” they wrote.

That has set the company up to end 2023 with roughly triple the number of locations as it had in 2020.

William Blair estimates that there’s room for at least 1,200 domestic Cava restaurants based on the population per restaurant already achieved in Virginia, where it’s still adding locations.

That supports management’s target of 1,000-plus locations by 2032.

“We also see the potential for digital drive-thrus to further lengthen CAVA’s growth runway while lifting AUVs (and potentially returns), with about one-third of this year’s new units having drive-thrus, ramping up to about half in 2024 (versus roughly 20 drive-thrus today),” they wrote. William Blair initiated coverage with an outperform rating.

JP Morgan launched coverage with an overweight rating and a December 2024 $45 stock price target. Analysts cheered the entrepreneurial sprit of Founder and CEO Brett Schulman with help from Chairman Ron Shaich, the founder of Panera Bread.

“In-store design/operational procedures and back-end support for the network allows CAVA to be efficient, safe and consistent as the brand leverages these systems for its goal national brand penetration,” they wrote in a note to clients.

Mediterranean cuisine covers many types of food and occasions, so the end-market is large, topping out at more than $1 trillion in U.S. sales.

While bowl builds priced at $10.95 to $16.95 will likely limit a high frequency of lower-income consumers, “we believe the brand has an enduring appeal to a very broad customer base for at least occasional usage.”

And suburbs are 82% of the site mix and are expected to remain a key location base, they added.

Stifel and Jefferies analysts initiated coverage with a buy rating and $48 price target. Stifel analysts led by Chris O’Cull also cheered the wide appeal of the food and compelling unit-level returns and highlighted the company’s healthy balance sheet.

“The company is in strong financial condition with no funded debt and roughly $340M in cash on hand following the company’s IPO,” they wrote in a note to clients. “We project the company’s average quarterly cash balance will remain above $200M with no funded debt for the foreseeable future. We project positive annual free cash flow starting in 2026.”

Still, not everyone is convinced the company is a buy. David Trainer, chief executive of New Constructs, an independent equity research firm that uses machine learning and natural-language processing to parse corporate filings and model economic earnings, published a series of critical reports before the IPO.

Trainer questioned Cava’s ability to reach profitability and its high valuation. He even compared it to WeWork
WE,
+5.80%,
the infamous startup created by Israeli entrepreneur Adam Neumann, that at its peak was valued at $47 billion, but is now trading at just 26 cents a share, or a market cap of $521 million.

The Renaissance IPO ETF
IPO,
+0.52%
has gained 32% in the year to date, while the S&P 500
SPX,
-0.07%
has gained 15%.

For more, see: Fast-casual restaurant chain Cava Group’s IPO documents raise some red flags: analyst

Read now: Cava Group CFO is confident restaurant chain will be profitable—but she won’t say when

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July 10, 2023

Like choosy shoppers at a retail store, IPO investors are demanding discounts and displaying price sensitivity

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IPO investors, much like retail shoppers in recent years’ inflationary environment, are demanding clear discounts and demonstrating sensitivity to price and valuations, according to Renaissance Capital.

The provider of IPO exchange-traded funds and institutional research said that’s a positive — even if tech unicorns in the pipeline would prefer it were not the case.

“Quality consumer names are working,” said Matthew Kennedy, senior strategist at Renaissance, listing Kenvue, Cava Group Inc., Gen Restaurant Group Inc. and Savers Value Village Inc. as examples of recent new issues that enjoyed strong debuts.

Kenvue
KVUE,
+1.65%,
the former consumer arm of Johnson & Johnson
JNJ,
+0.87%
and parent of household-name products such as Tylenol and Band-Aid, raised $3.8 billion in its May IPO at a valuation of $41.08 billion, making it the biggest deal of the year to date.

Cava Group
CAVA,
-5.93%,
the loss-making Mediterranean-style fast-casual restaurant group, raised $317 million in its mid-June deal at a valuation of $2.5 billion. The stock popped more than 99% on its first day of trade.

For more: Cava Group CFO is confident restaurant chain will be profitable — but she won’t say when

Gen Restaurant Group
GENK,
+13.95%
is a profitable Korean barbecue chain that made its debut Wednesday with a more than 50% pop in early trade.

“But broadly investors are still demanding clear discounts to public peers, especially if they take issue with certain aspects of a deal. So it’s good to see that valuation sensitivity,” said Kennedy.

Savers Value Village
SVV,
+3.45%
went public Thursday with some fanfare, closing 27% above its $18 issue price. The company is the biggest for-profit thrift-store chain in North America, with 317 stores that operate under multiple names.

The company is profitable, with net income of $11.9 million in the quarter through April 2, after a loss of $10.2 million in the same period a year earlier. For all of 2022, it had net income of $84.7 million, up from $83.4 million in 2021.

Revenue for the quarter came to $327.5 million, down from $345.7 million in the year-ago period. Revenue totaled $1.4 billion for 2022, up from $1.2 billion in 2021.

See: Money-losing food chain Cava showed IPO success. Is it finally time for some tech deals?

Two other deals that made their debut on Thursday fared less well, however.

Texas-based Kodiak Gas Services Inc.
KGS,
+3.44%
and Fidelis Insurance Holdings Ltd. closed lower after pricing below their estimated ranges and making other accommodations to get their deals through.

Bermuda-based Fidelis, a reinsurer, downsized its deal to 15 million shares from a previous expectation that it would offer 17 million. The initial public offering was priced at $14 a share, below the proposed $16-to-$19 range.

Maker of oil- and gas-production equipment Kodiak opened almost 3% below its issue price of $16, which was well below its proposed price range of $19 to $22.

Fidelis has an unusual structure, in that it uses a third party for origination, underwriting and claims management, said Kennedy.

“We think insurance investors wanted a discount for a company that didn’t own the underwriting group,” he said. “It has an experienced management team, though, so now they’ll just need to execute.”

Kodiak, meanwhile, carries substantial debt and will need to undertake significant capital spendig in the coming years, just as gas prices have fallen back.

It’s also worth noting that the last big oil and gas IPO, Atlas, “is slightly below its offer price,” Kennedy said.

Atlas Energy Solutions Inc.
AESI,
-2.75%
went public in March at an issue price of $18 a share. The stock was last quoted at $17.52.

Still, Renaissance is expecting a gradual reopening of the IPO market in the second half, said Kennedy, who noted that the IPO ETF
IPO,
+1.38%
has gained about 30% in to date in 2023, outperforming the S&P 500’s
SPX,
+1.23%
14% gain.

To date, there have been 52 IPOs this year, up 33% from the same time last year, when the market was effectively frozen. Almost $9 billion in proceeds have been raised, up 115% from last year but well below levels seen in frothier times.

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June 30, 2023

Cava Group CFO is confident restaurant chain will be profitable — but she won’t say when

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Cava Group, the Mediterranean-focused fast-casual restaurant chain that’s making its trading debut on Thursday, is confident it has access to enough funding to expand its business and make a profit, according to Chief Financial Officer Tricia Tolivar.

But Tolivar declined to provide a timeline to profitability in an interview with MarketWatch.

The…

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June 15, 2023

Mediterranean fast-casual restaurant chain Cava prices IPO at $22 a share

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Mediterranean fast-casual restaurant chain Cava Group on Wednesday priced its initial public offering of 14.4 million shares at $22 a share, up from a prior range, giving the company a valuation of roughly $2.45 billion.

Shares are expected to begin trading Thursday on the New York Stock Exchange with the ticker symbol CAVA.

The rapidly-growing…

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June 14, 2023

Airbnb stock falls sharply on cautious forecast and as record bookings miss estimates

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Nights booked on Airbnb Inc. hit a record high in the first quarter as more guests traveled overseas and returned to cities, leading to the company’s first profitable start to the year on record, executives announced Tuesday.

But executives’ forecast was less bullish, even though they expect a strong summer travel season and second-quarter revenue growth. They cautioned that growth in nights and experiences booked will be “unfavorable” compared with the year-ago quarter, when there was a surge in travel demand as fears about…

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May 9, 2023

Hotel housekeeping jobs have fallen by 102,000 during the pandemic. What happened?

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As some U.S. hotels hung on to practices they adopted during the early stages of the coronavirus pandemic — such as eliminating daily room cleanings — the number of hotel housekeepers fell by more than 102,000 last year from prepandemic levels, new data show.

The total number of hotel housekeeping jobs as of May 2022 was 364,990, a 22% decline from the total of 467,270 such positions during the same period in 2019, according to numbers released last week by the Bureau of Labor Statistics.

Unions…

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May 2, 2023

These 20 stocks led the January rally

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The initial version of this story had incorrect price changes for 2023. It is now updated with information as of the market close on Jan. 31.

Investors staged a January rally, with solid gains for the S&P 500 and an even better showing for technology stocks that led the dismal downward action in 2022.

This…

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January 31, 2023

Tesla, GM, Lucid, Alibaba, and More Stock Market Movers

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This copy is for your personal, non-commercial use only. To order presentation-ready copies for distribution to your colleagues, clients or customers visit http://www.djreprints.com.

https://www.barrons.com/articles/stock-market-movers-tesla-alibaba-gm-lucid-51674835133

Updated Jan. 30, 2023 6:26 am ET / Original Jan. 30, 2023 5:25 am ET

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January 30, 2023

Philips says it will cut 6,000 extra jobs by 2025 as it swings to a loss

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Royal Philips NV on Monday said it will cut an extra 6,000 jobs by 2025, including around 3,000 this year, as part of a plan to improve performance and drive value creation.

The Dutch health-technology company
PHIA,
+0.57%

PHG,
+0.59%
–which said in October that it was cutting 4,000 jobs, or about 5% of its 80,000-strong workforce–said Monday that the simplified operating model will make it more agile and competitive, while reducing costs. The job cuts announced Monday are in addition to those outlined in October.

Philips said that it will now focus on extracting the full value of its portfolio through a strategy of focused organic growth.

The company made the disclosure as it reported a swing to net loss for the fourth quarter of last year amid higher costs, but said that it has seen some improvement in the period and that is taking actions to address operational challenges in an uncertain environment.

The Dutch health-technology company–which sells products including MRI scanners and ultrasound machines–posted a net loss attributable to shareholders of 106 million euros ($170.6 million) compared with a profit of EUR157 million for the fourth quarter of 2021 and a company-compiled consensus loss of EUR16 million.

Adjusted earnings before interest, taxes and amortization–which strips out exceptional and other one-off items–was EUR651 million compared with EUR647 million and a consensus of EUR428 million.

The company said its performance was hit by cost inflation that was partly offset by pricing and productivity measures.

Group sales in the period were EUR5.42 billion compared with EUR4.94 billion and a consensus of EUR5.03 billion.

Like-for-like sales were up 3%, compared with a company-compiled forecast for a fall of 5.2%, due to improved component supplies

Royal Philips said it now expects low-single-digit comparable sales growth and high-single-digit adjusted Ebita margin for this year.

It has also targeted mid-single-digit comparable sales growth and a low-teens adjusted Ebita margin by 2025, and for mid-single-digit comparable sales growth and mid-to-high-teens adjusted Ebita margin beyond 2025.

“Considering the slowing of consumer demand and a gradual improvement of the order book conversion during 2023, Philips anticipates a slow start to the year, with improvements throughout the year supported by the ongoing productivity, pricing and other actions,” it said.

Write to Ian Walker at ian.walker@wsj.com

The company said its performance was hit by cost inflation that was partly offset by pricing and productivity measures.

Group sales in the period were EUR5.42 billion compared with EUR4.94 billion and a consensus of EUR5.03 billion.

Like-for-like sales were up 3%, compared with a company-compiled forecast for a fall of 5.2%, due to improved component supplies

Royal Philips said it now expects low-single-digit comparable sales growth and high-single-digit adjusted Ebita margin for this year.

“Considering the slowing of consumer demand and a gradual improvement of the order book conversion during 2023, Philips anticipates a slow start to the year, with improvements throughout the year supported by the ongoing productivity, pricing and other actions,” it said.

Write to Ian Walker at ian.walker@wsj.com

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January 29, 2023

18 stock picks in a ‘Goldilocks’ scenario for U.S. consumers

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It may not have been a surprise to see the consumer discretionary sector of the S&P 500 get hammered last year amid talk of a looming recession while the Federal Reserve jacked up interest rates to push back against inflation.

But the stock market always looks ahead. Following a decline of 19.4% for the S&P 500
SPX,
+0.42%
in 2022 and a 37.6% drop for the benchmark index’s consumer discretionary sector, this may be the time to begin looking for bargains.

And now, analysts at Jefferies have lifted the sector to a “bullish” rating.

In a note to clients on Jan. 10, Jefferies’ global equity strategist, Sean Darby, wrote: “A Goldilocks scenario might be unfolding for the U.S. consumer — falling inflation but steady employment conditions.”

He sees consumer confidence improving, in part because “households are still sitting on [about] $1.4 trillion of Covid savings.”

Darby pointed to a list of 18 consumer discretionary stocks favored by Jefferies analysts that was published on Jan. 6. Those are listed below, along with three stocks in the sector the analysts rate “underperform.”

The ratings of the Jefferies analysts for individual stocks is based on their 12-month outlooks for the companies, in keeping with Wall Street tradition.

So we have added another list further down, showing which companies in the S&P 500 consumer discretionary sector are expected by analysts polled by FactSet to increase sales the most through 2024.

The Jefferies 18

Here are the 18 consumer discretionary stocks recommended by Jefferies analysts with “buy” ratings on Jan. 6, sorted by how much upside the firm sees for the shares from closing prices on Jan. 9:

Company	Ticker	Jan. 9 price	Jefferies price target	Implied 12-month upside potential	Three-year estimated sales CAGR through 2022	Two-year estimated sales CAGR through 2024
Topgolf Callaway Brands Corp.	MODG, -0.22%	$20.76	$56	170%	32.8%	10.0%
Bloomin’ Brands Inc.	BLMN, +3.87%	$22.08	$35	59%	2.4%	3.7%
Coty Inc. Class A	COTY, +1.23%	$9.38	$14	49%	-7.1%	3.7%
MGM Resorts International	MGM, +1.71%	$37.64	$56	49%	-0.1%	6.6%
Chewy Inc. Class A	CHWY, +1.63%	$40.13	$57	42%	28.0%	10.6%
Planet Fitness Inc. Class A	PLNT, +0.69%	$82.36	$115	40%	10.4%	13.9%
Molson Coors Beverage Co. Class B	TAP, +0.67%	$50.21	$69	37%	0.5%	1.4%
Fox Factory Holding Corp.	FOXF, +3.95%	$99.90	$135	35%	28.1%	6.6%
Hasbro Inc.	HAS, +0.99%	$63.70	$85	33%	9.1%	3.6%
Hostess Brands Inc. Class A	TWNK, +0.33%	$23.10	$30	30%	14.2%	5.0%
Lowe’s Cos. Inc.	LOW, +0.08%	$199.44	$250	25%	10.6%	-1.9%
Walmart Inc.	WMT, -0.27%	$144.95	$175	21%	4.9%	3.3%
Dollar General Corp.	DG, -0.26%	$241.05	$285	18%	10.9%	6.7%
Church & Dwight Co. Inc.	CHD, -1.17%	$82.25	$97	18%	7.0%	4.6%
McDonald’s Corp.	MCD, +0.39%	$267.25	$315	18%	2.4%	4.0%
Estee Lauder Cos. Inc. Class A	EL, +0.39%	$261.63	$304	16%	2.8%	5.8%
Mondelez International Inc. Class A	MDLZ, -0.04%	$67.24	$75	12%	6.3%	4.1%
Tapestry Inc.	TPR, +0.73%	$41.25	$45	9%	3.3%	3.2%
Sources: Jefferies, FactSet

Click on the tickers for more information about the companies.

Click here for Tomi Kilgore’s detailed guide to the wealth of information available for free on the MarketWatch quote page.

The two right-most columns on the table show estimated compound annual growth rates (CAGR) for the companies over the past three calendar years and expected sales CAGR for two years through calendar 2024, based on the companies’ financial reports and consensus estimates among analysts polled by FactSet.

(We used calendar-year numbers, some of which are estimated by FactSet for prior years, because some companies have fiscal years or even months that don’t match the calendar.)

The stock pick with the highest 12-month upside potential, based on Jefferies’ price target, is Topgolf Callaway Brands Corp.
MODG,
-0.22%.
This company has the highest estimated three-year sales CAGR on the list, and has the third-highest projected sales CAGR through 2024, after Planet Fitness Inc.
PLNT,
+0.69%
and Chewy Inc.
CHWY,
+1.63%.

On Jan. 6, the Jefferies analysts also listed three stocks in the sector they rated “underperform.” Here they are, sorted by how much the analysts expect the stocks to decline over the next 12 months:

Company	Ticker	Jan. 9 price	Jefferies price target	Implied 12-month upside potential	Three-year estimated sales CAGR through 2022	Two-year estimated sales CAGR through 2024
Lululemon Athletica Inc.	LULU, +2.98%	$298.66	$200	-33%	26.3%	14.6%
Williams-Sonoma Inc.	WSM, +1.75%	$122.17	$98	-20%	14.1%	-0.3%
Harley-Davidson Inc.	HOG, +0.35%	$43.25	$39	-10%	-2.8%	4.4%
Sources: Jefferies, FactSet

Screen of consumer discretionary sales growth

A look head at which companies are expected to increase sales the most over the next two years might serve as a good starting point for your own research.

Bear in mind that some of the companies in travel-related industries suffered declining sales for three years through 2022 because of the coronavirus pandemic. Some of those are on this new list of 20 stocks in the S&P 500 consumer discretionary sector expected to show the highest two-year sales CAGR through calendar 2024:

Company	Ticker	Two-year estimated sales CAGR through 2024	Three-year estimated sales CAGR through 2022	Share “buy” ratings	Jan. 9 price	Consensus price target	Implied 12-month upside potential
Las Vegas Sands Corp.	LVS, +1.59%	59.2%	-32.6%	79%	$52.78	$53.53	1%
Norwegian Cruise Line Holdings Ltd.	NCLH, +1.67%	39.6%	-9.3%	44%	$13.78	$16.96	23%
Carnival Corp.	CCL, +1.64%	35.2%	-14.7%	30%	$9.47	$10.11	7%
Tesla Inc.	TSLA, -1.83%	34.3%	49.7%	64%	$119.77	$232.43	94%
Wynn Resorts Ltd.	WYNN, +2.01%	29.3%	-17.5%	53%	$94.33	$96.07	2%
Royal Caribbean Group	RCL, +2.22%	28.4%	-6.8%	53%	$57.29	$66.43	16%
Chipotle Mexican Grill Inc.	CMG, -0.17%	13.4%	15.9%	71%	$1,446.74	$1,778.81	23%
Amazon.com Inc.	AMZN, +2.61%	12.2%	22.1%	92%	$87.36	$133.76	53%
Booking Holdings Inc.	BKNG, +0.37%	11.9%	3.9%	63%	$2,208.41	$2,307.67	4%
Aptiv PLC	APTV, +1.66%	11.9%	6.4%	70%	$97.98	$117.23	20%
Starbucks Corp.	SBUX, +1.28%	11.2%	7.2%	42%	$104.74	$103.44	-1%
Etsy Inc.	ETSY, +3.56%	11.1%	45.3%	50%	$120.99	$124.04	3%
Hilton Worldwide Holdings Inc.	HLT, +0.06%	10.1%	-2.9%	38%	$129.08	$146.17	13%
Expedia Group Inc.	EXPE, +0.39%	9.0%	-0.9%	50%	$93.77	$125.65	34%
NIKE Inc. Class B	NKE, +0.68%	8.1%	5.8%	62%	$124.85	$126.15	1%
Marriott International Inc. Class A	MAR, +0.47%	7.5%	-1.2%	30%	$152.53	$172.81	13%
BorgWarner Inc.	BWA, +1.82%	7.1%	15.3%	53%	$42.24	$46.93	11%
Tractor Supply Co.	TSCO, +1.06%	6.8%	19.0%	61%	$217.48	$232.34	7%
Yum! Brands Inc.	YUM, -0.76%	6.7%	6.4%	47%	$129.76	$137.79	6%
Dollar General Corp.	DG, -0.26%	6.7%	10.9%	67%	$241.05	$267.54	11%
Source: FactSet

Among the companies on this list that didn’t suffer sales declines from 2019 levels, Tesla Inc.
TSLA,
-1.83%
is expected to achieve the highest two-year sales CAGR through 2022.

Dollar General Corp.
DG,
-0.26%
is the only company to appear on this list based on consensus sales growth estimates and the Jefferies recommended list.

Don’t miss: These 15 Dividend Aristocrat stocks have been the best income builders

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January 10, 2023

SEC charges ex–McDonald’s CEO Easterbrook for making false statements relating to his 2019 ouster

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The Securities and Exchange Commission said Monday it has filed charges against Stephen J. Easterbrook, former chief executive of McDonald’s Corp., for making “false and misleading” statements to investors about the circumstances that led to his ouster in November 2019.

The agency has also filed charges against McDonald’s for “shortcomings” in its public disclosures relating to Easterbrook’s severance agreement.

McDonald’s
MCD,
-0.55%
fired Easterbrook for exercising poor judgment and violating company policy by engaging in an inappropriate personal relationship with a McDonald’s employee. However, the separation agreement struck with the executive concluded that his termination was without cause, allowing him to retain substantial equity compensation that would have been forfeited in other circumstances.

“In making this conclusion, McDonald’s exercised discretion that was not disclosed to investors,” the SEC said in a statement.

In July 2020, McDonald’s discovered in an internal probe that Easterbrook had engaged in other, undisclosed relationships with employees. Those findings were not disclosed prior to Easterbrook’s termination, in the knowledge that they would influence the board’s decision making, according to the SEC.

“When corporate officers corrupt internal processes to manage their personal reputations or line their own pockets, they breach their fundamental duties to shareholders, who are entitled to transparency and fair dealing from executives,” said Gurbir S. Grewal, the SEC’s director of the division of enforcement.

The SEC is charging Easterbrook with violating anti-fraud provisions of the SEC Securities Act of 1933 and the Securities Exchange Act of 1934. Easterbrook has consented to a cease-and-desist order and five-year officer and director bar and a $400,000 civil penalty, without admitting to or denying the charges.

McDonald’s is charged with violating section 14(a) of the Exchange Act and Exchange Act Rule 14a-3. The fast-food giant has consented to a cease-and-desist order, without admitting to or denying SEC findings. The SEC has opted not to fine the company, as it cooperated with the agency and clawed back compensation after its probe.

The stock was slightly lower Monday in early trades.

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January 9, 2023

These 20 stocks were the biggest losers of 2022

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This has been the year of reckoning for Big Tech stocks — even those of companies that have continued to grow sales by double digits.

Below is a list of the 20 stocks in the S&P 500
SPX,
-0.72%
that have declined the most in 2022.

First, here’s how the 11 sectors of the benchmark index have performed this year:

S&P 500 sector	2022 price change	Forward P/E	Forward P/E as of Dec. 31, 2021
Energy	57.8%	9.6	11.1
Utilities	-0.5%	18.8	20.4
Consumer Staples	-2.7%	20.9	21.8
Healthcare	-3.2%	17.4	17.2
Industrials	-6.7%	18.0	20.8
Financials	-12.1%	11.7	14.6
Materials	-13.4%	15.6	16.6
Real Estate	-27.7%	16.2	24.2
Information Technology	-28.8%	19.6	28.1
Consumer Discretionary	-37.4%	20.7	33.2
Communication Services	-40.4%	14.0	20.8
S&P 500	-19.2%	16.5	21.4
Source: FactSet

The energy sector has been the only one to show a gain in 2022, and it has been a whopper, even as West Texas Intermediate crude oil
CL.1,
+0.41%
has given up most of its gains from earlier in the year. Here’s why investors are still confident in the supply/demand setup for oil and energy stocks.

Looking at the worst-performing sectors, you might wonder why the consumer discretionary and communication services sectors have fared worse than information-technology, the core tech sector. One reason is that S&P Dow Jones Indices can surprise investors with its sector choices. The consumer discretionary sector includes Tesla Inc.
TSLA,
+0.70%
and Amazon.com Inc.
AMZN,
-1.17%,
which has fallen nearly 50% this year. The communications sector includes Meta Platforms Inc.
META,
-1.21%,
along with Match Group Inc.
MTCH,
+0.50%,
which is down 69% for 2022, and Netflix Inc.
NFLX,
-0.44%,
which is down 52% this year.

There have been many reasons easy to cite for Big Tech’s decline, such as a questionable change in strategy for Facebook’s holding company, Meta, as CEO Mark Zuckerberg has put so much of the company’s resources into developing a new world that most people don’t wish to enter, at least yet. Meta’s shares were down 64% for 2022 through Dec. 29.

You might also blame the Twitter-related antics and sales of Tesla shares by CEO Elon Musk for the 65% decline in the electric-vehicle maker’s stock this year. But Tesla had a forward price-to-earnings ratio of 120.3 at the end of 2021, while the S&P 500
SPX,
-0.72%
traded for 21.4 times its weighted forward earnings estimate, according to FactSet. Those P/E ratios have now declined to 21.7 and 16.4, respectively. So Tesla no longer appears to be a very expensive stock, especially for a company that increased its vehicle deliveries by 42% in the third quarter from a year earlier.

Analysts polled by FactSet expect Tesla’s stock to double during 2023. It nearly made this list of 20 EV stocks expected to rebound the most in 2023.

The worst-performing S&P 500 stocks of 2022

Here are the 20 stocks in the S&P 500 that fell the most for 2022 through the close on Dec. 29.

Company	Ticker	2022 price change	Forward P/E	Forward P/E as of Dec. 32, 2021
Generac Holdings Inc.	GNRC, -0.84%	-71.4%	13.7	30.2
Match Group Inc.	MTCH, +0.50%	-68.9%	20.1	48.5
Align Technology Inc.	ALGN, -0.52%	-67.7%	27.4	48.7
Tesla Inc.	TSLA, +0.70%	-65.4%	21.7	120.3
SVB Financial Group	SIVB, -0.38%	-65.4%	10.8	23.0
Catalent Inc.	CTLT, -0.40%	-64.6%	13.0	32.5
Meta Platforms Inc. Class A	META, -1.21%	-64.2%	14.7	23.5
Signature Bank	SBNY, -0.34%	-64.1%	6.2	18.6
PayPal Holdings Inc.	PYPL, -0.01%	-62.6%	14.8	36.0
V.F. Corp.	VFC, +0.15%	-62.5%	11.9	20.4
Warner Bros. Discovery Inc. Series A	WBD, -1.64%	-59.9%	N/A	7.5
Carnival Corp.	CCL, -0.23%	-59.8%	38.1	N/A
Stanley Black & Decker Inc.	SWK, -0.42%	-59.8%	17.0	15.9
Lumen Technologies Inc.	LUMN, -1.79%	-57.8%	7.7	7.8
Zebra Technologies Corp. Class A	ZBRA, -0.44%	-56.7%	14.5	30.1
Dish Network Corp. Class A	DISH, -0.96%	-56.5%	8.6	10.9
Caesars Entertainment Inc.	CZR, +0.24%	-55.7%	51.4	144.5
Lincoln National Corp.	LNC, +0.26%	-55.1%	3.4	6.2
Advanced Micro Devices Inc.	AMD, -0.97%	-55.0%	17.8	43.1
Seagate Technology Holdings PLC	STX, -0.55%	-53.1%	15.0	12.4
Source: FactSet

Click on the tickers for more information about the companies.

Click here for Tomi Kilgore’s detailed guide to the wealth of information available for free on the MarketWatch quote page.

Another way of measuring the biggest stock-market losers of 2022

It is one thing to have a large decline based on the share price, but that doesn’t tell the entire story. How much of a decline have investors seen in the holdings of their shares during the year? The S&P 500’s total market capitalization declined to $31.66 trillion as of Dec. 28 (the most recent figure available) from $40.36 trillion at the end of 2021, according to FactSet.

Shareholders of these companies have suffered the largest declines in market cap during 2022.

Company	Ticker	2022 market capitalization change ($bil)	2022 price change
Apple Inc.	AAPL, -0.63%	-$851	-27.0%
Amazon.com Inc.	AMZN, -1.17%	-$832	-49.5%
Microsoft Corp.	MSFT, -1.15%	-$728	-28.3%
Tesla Inc.	TSLA, +0.70%	-$677	-65.4%
Meta Platforms Inc. Class A	META, -1.21%	-$465	-64.2%
Nvidia Corp.	NVDA, -1.37%	-$376	-50.3%
PayPal Holdings Inc.	PYPL, -0.01%	-$141	-62.6%
Netflix Inc.	NFLX, -0.44%	-$138	-51.7%
Walt Disney Co.	DIS, -1.62%	-$123	-43.7%
Salesforce Inc.	CRM, -0.96%	-$118	-47.8%
Source: FactSet

So there is your surprise for today: Apple is this year’s biggest stock-market loser.

Don’t miss: Best stock picks for 2023: Here are Wall Street analysts’ most heavily favored choices

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December 30, 2022

Cheap? Maybe. But These Stocks Have Been Dead Money for Decades

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Cheesecake Factory appears to be “running the same play,” wrote J.P. Morgan analyst John Ivankoe in a recent restaurant industry outlook. I don’t think he meant it as a compliment—the stock, he noted, trades where it did in 2004, adjusted for splits.

Why the long stall-out? My first thought was that maybe hitting the mall for a hypercaloric sit-down meal off a menu the size of a Gutenberg Bible has fallen out of favor over the years. But no: Sales have bounced back and then some from the Covid pandemic, with plenty of takeout business and dessert orders. The average

Cheesecake Factory

(ticker: CAKE) restaurant does more than $10 million in yearly sales, or twice as much as an Olive Garden.

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December 23, 2022

Starbucks says higher prices, customizable beverages will carry it through potential economic winter

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Ever since Starbucks Corp. rolled out longer-term financial targets in September, Wall Street has wondered how the coffee chain might meet what analysts say were ambitious goals, as rising prices drain consumer spending. For at least the year ahead, executives on Thursday called out three ways to get there: higher prices, younger customers and cold, customizable beverages.

For the fiscal year ahead, executives for the coffee chain on Thursday said they expected global same-store sales to be “near the high end” of its long-term target of between 7% to 9% growth. FactSet expects growth of 8.6%.

When an analyst asked what gave management confidence in that target, interim Chief Executive Howard Schultz said that its coffee was an “affordable luxury,” and that it was armed with a loyalty program that it didn’t have in years past. And they said its customers were getting younger, not older.

“Not only has it gotten younger, but that young, Gen Z customer tends to have significantly more discretionary money at their disposal,” he said. “And their loyalty to Starbucks has been quite significant and predicted.”

He said Starbucks
SBUX,
+0.12%
had raised prices by nearly 6% over the past 12 months and hadn’t seen demand subside. And he said cold coffee beverages made up 76% percent of total drink sales in its U.S. company-owned stores. In the fourth quarter, more than half of beverages overall in those stores were customized, leading to $1 billion in sales a year for add-on syrups, foams and other ingredients.

“I think customization, which we spoke a lot about in our prepared remarks, is obviously giving us the ticket is becoming more accretive,” he said.

Management said they expect U.S. same-store sales growth of 7% to 9% for the year ahead. For China, they’re banking on “outsize” growth for the metric — interrupted by a decrease in the first-quarter — as the nation potentially emerges from pandemic-related lockdowns.

For overall revenue, they expect gains of between 10% and 12%. Management also said they would resume their buyback program in fiscal 2023.

Even as the Federal Reserve tries to chart a path to lower prices, Starbucks is the latest company to say it still has “pricing power,” or the ability to charge customers more. Snack maker Mondelez International
MDLZ,
-0.93%,
earlier in the week, said it planned to raise prices through next year. Similarly, its own chief executive also described its snacks as an “affordable indulgence.”

Prior to the call, Starbucks reported fiscal fourth-quarter results that beat expectations, helped by a boost in U.S. sales and higher prices.

The coffee chain reported net income of $878 million, or 76 cents a share, compared with $1.76 billion, or $1.49 a share, in the same quarter last year. Revenue rose 3% to $8.4 billion, compared with $8.15 billion in the prior-year quarter.

Same-store sales rose 7% worldwide, helped largely by bigger ticket sizes, even as actual transaction volume remained muted. They were up 11% in the U.S. But international same-store sales fell 5%, with a 16% drop in China.

Excluding restructuring, impairment and other costs, Starbucks earned 81 cents per share, compared with 99 cents a year earlier. U.S. members of its loyalty program who were active for three months rose 16% to 28.7 million.

Analysts polled by FactSet expected Starbucks to report adjusted earnings per share of 72 cents, on revenue of $8.323 billion. Same-store sales were expected to rise 4.2%.

Shares rose 2.4% after hours.

As with other restaurants and retailers, Starbucks’ sales this year have been helped by price increases. Analysts have also said higher-income consumers, who might not mind higher prices as much, as well as demand for cold beverages, have propelled demand. While China’s COVID-19 restrictions have weighed on sales, analysts say demand trends are strong elsewhere.

“The U.S. business is humming, and the China risk is increasingly understood,” Wedbush analyst Nick Setyan wrote in a research note ahead of Starbucks’ earnings.

The earnings report comes as Starbucks battles a nascent unionization push at some of its stores. Some bargaining efforts between the company and the union members have stalled, amid allegations from both of bad-faith negotiations. The company over the past year has spent more to raise employee pay and rolled out other incentives at non-union stores.

Starbucks stock has tumbled 27% so far this year. The S&P 500 Index
SPX,
-1.06%,
by comparison, is down around 22%.

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November 3, 2022

McDonald’s ‘adult Happy Meal’ toys are selling for up to $300,000 on eBay

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When it comes to nostalgia, McDonald’s customers sure are lovin’ it.

The burger chain brought back its Halloween pails on Tuesday, which haven’t been offered in the U.S. since 2016. The plastic trick-or-treat buckets decorated to look like a ghost, a goblin or a jack-o’-lantern (aka McBoo, McGoblin and McPunk’n, respectively) quickly began trending among real-time Google searches on Tuesday.

But the appetite for these Halloween buckets is nothing compared to the recent McDonald’s
MCD,
+1.10%
collaboration with streetwear company Cactus Plant Flea Market, which dished out a $12-$13 box (better known as the “adult Happy Meal”) that featured a food combo and a collectible figurine targeted toward the grownups who grew up on Happy Meals.

They sold out quickly, and now some enterprising fast food lovers are hawking the adult Happy Meal toys over online resale sites for thousands of dollars.

So what’s the appeal? Nostalgia, nostalgia, nostalgia. “Everyone remembers their first Happy Meal as a kid … and the can’t-sit-still feeling as you dug in to see what was inside,” McDonald’s wrote in a press release. “And now, we’re reimagining that experience in a whole new way — this time, for adults.”

The limited-edition Cactus Plant Flea Market Box at McDonald’s rolled out on Oct. 3, feeding the inner child of the average customer by offering a choice of a Big Mac or 10-piece chicken nuggets main dish, french fries and a soft drink, as well as one of four “toys” featuring redesigned McDonald’s mascots like the Grimace, the Hamburgler and Birdie, as well as a new “Cactus Buddy!” figure (yes, the exclamation point is part of his name.)

The Cactus Plant Flea Market boxes sold out in many places on the same day that they came out. Some McDonald’s employees took to Reddit and TikTok to share how much they were not lovin’ it — which was reminiscent of the hatred many Starbucks
SBUX,
+0.07%
employees felt toward the viral unicorn frappuccino in 2017.

And now, both the toys and the boxes have become near impossible to come by — unless you’re willing to cough up a lot of cash. A medium Cactus Plant Flea Market Box costs about $12, with large box closer to $13 — and one New Jersey mom noted that in her area, a Big Mac combo with fries and a drink runs under $10, so she spent $3 basically get the collectible toy.

But one eBay listing offering three of the collectible Cactus Plant Flea Market, still unwrapped and in their original packaging, is asking for a whopping $300,000.

The sold-out Cactus Plant Flea Market Boxes, aka McDonald’s “adult Happy Meals,” are popping up on resale sites for thousands of dollars.

Screenshot

Another listing on the fashion marketplace Grailed, which is marked as an “authenticated” post, features the “Cactus Buddy!” figure for the asking price of $39,999 (10% off of the original $44,444 price tag.)

But there are dozens of other listings for the individual toys and boxes on resale sites such as eBay and Facebook Marketplace in the much more palatable $10-$30 range, or bundles with all four collectible figurines running between $60-$70.

McDonald’s was not immediately available for comment, but a rep told Axios that, “The hype for the Cactus Plant Flea Market Box was so real that some of our restaurants have sold out of the limited-edition experience.” They added that, “We’re thrilled by the excitement we’re seeing.”

The official McDonald’s Twitter account has also been fielding queries from disappointed potential customers who haven’t been able to get their hands on any of the adult Happy Meals, apologizing that this was only a limited time offer.

Time will tell if more “adult Happy Meals” will be offered in the future. There’s clearly a customer base hungry for more.

This isn’t McDonald’s first viral sensation, of course. The fast food giant has also scored success with celebrity collaborations featuring K-Pop sensation BTS, or singing diva Mariah Carey — which also reportedly sold out.

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October 18, 2022

U.S. stocks edge up despite higher-than-expected inflation data

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U.S. stock indexes edged higher on Wednesday, while hotter-than-expected producer price inflation data deepened concerns that the Federal Reserve may continue its aggressive interest rate hikes.

How are stock-index futures trading

The Dow Jones Industrial Average
DJIA,
+0.50%
was up 120 points, or 0.4% to around 29,355
The S&P 500
SPX,
+0.35%
gained 5.3 points, or 0.2% to about 3,594
The Nasdaq Composite
COMP,
-6.31%
traded 5.1 points, or 0.1% higher to 10,430

On Tuesday, the Dow Jones Industrial Average rose 36 points, or 0.12%, to 29239, the S&P 500 declined 24 points, or 0.65%, to 3589, and the Nasdaq Composite dropped 116 points, or 1.1%, to 10426. The S&P 500 closed down 1,177 points, or 24.7% for the year to date.

What’s driving markets

The 12-month rate of producer price inflation slowed to to 8.5% from 8.7% while the annual core rate, excluding food and energy, was unchanged at 5.6%, but the monthly rate rose 0.4% in September, above forecast, and the monthly core PPI was also up 0.4% in September.

Such data has worsened fears that to curb inflation, the Fed will continue its aggressive rate hikes, which may steer the U.S. economy into a recession.

“We believe the odds of a recession in 2023 are now better than 50%,” Greg Bassuk, chief executive at AXS Investments, wrote in a Wednesday note. “Last week’s market turbulence saw volatility at levels we have not seen since July, and we believe investors should brace for ongoing market volatility and uncertainty throughout Q4, in concert with another likely Fed interest rate hike to the tune of 0.75% in November,” according to Bassuk.

The 10-year Treasury yield BX:TMUBMUSD10Y, which started the year around 1.65% was trading at 3.931% on Wednesday, off 1.3 basis points, after the producer price inflation data.

Traders are also awaiting U.S. September consumer prices data on Thursday due at 8:30 am Eastern Time.

“Inflation has proven to be difficult to forecast and given the negative ‘shock’ from the August CPI, it would be difficult for any investor to have conviction going into this report,” according to Tom Lee, head of research at Fundstrat.

“For us, analyzing the month over month numbers is much more important than looking at the headline,” Zachary Hill, head of portfolio management at Horizon Investments, said in an interview.

“The way we’ve been thinking about it, the last three months annualized [inflation] gives you a kind of a decent idea of where the shorter term trends are around inflation,” Hill said. “We think that’s what the Fed is going to be looking at to see progress towards their 2% goal. And unfortunately, based on various measures, we’re nowhere near that today.”

Adding to the market anxiety, and keeping any Wednesday rally in check, is the continuing volatility in U.K. government bonds after the Bank of England reiterated it would stop supporting the market after Friday.

Investors have become increasingly concerned of late that severe stresses in the financial system may emerge as central banks switch from the era of zero or negative interest rates to sharply higher borrowing costs as they try to tackle inflation at multi-decade highs.

“[G]lobal financial conditions have tightened as central banks continue to raise interest rates. Our latest Global Financial Stability Report shows that financial stability risks have increased since our last report, with the balance of risks tilted to the downside,” said the International Monetary Fund in a report released on Tuesday.

“The mood of global investors was gloomy enough and hardly needed yesterday’s reminder from the IMF that the risks to financial stability have increased,” Ian Williams, strategist at Peel Hunt, noted. “Its report highlighted specifically (if obviously) the threats from persistent inflation, China’s slowdown and the war in Ukraine. The highlighted ‘disorderly repricing of risk’ is arguably already underway.”

The Fed may offer its view on the topic as a number of officials are due to give comments on Wednesday. Minneapolis Fed President Neel Kashkari said the Fed is “dead serious” about getting inflation down. Fed vice chair Michael Barr will speak at 1:45 p.m. The minutes of the Fed’s previous monetary policy setting meeting will be released at 2 p.m. ET and Fed governor Michelle Bowman will deliver comments at 6.30 pm.

Companies in focus

Shares of Philips
PHIA,
-12.27%

PHG,
-11.33%
plunged 12% after the Dutch tech company issued its second profit warning this year, forewarning that supply chain problems will impact sales and third-quarter profits.
Intel Corp.
INTC,
+1.50%
may fire thousands of workers by the end of the month, around the same time the chip manufacturer reports quarterly results amid a tough year for semiconductor makers, Bloomberg reported late Tuesday. The company’s shares rose 1% Wednesday.
Shares of PepsiCo Inc. climbed 4.6% Wednesday, after the beverage and snack giant reported third-quarter profit and revenue that rose above expectations and raised its full-year outlook, as higher prices helped offset some volume weakness.

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October 12, 2022

Philips warns of 5% fall in like-for-like sales due to supply-chain woes

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Royal Philips NV said Wednesday that its performance for the third quarter was hurt by stronger-than-anticipated supply-chain challenges, and adopted a more pessimistic view on its sales through the end of the year.

The Dutch health-technology company
PHIA,
-8.01%

PHG,
-0.80%
said that it expects to record a 1.3 billion euro ($1.26 billion) impairment charge in the period. The company said that this is an impairment of goodwill of Philips Respironics, its sleep and respiratory care business, and that it is due to revisions to the business’s financial forecast.

This compares with adjusted Ebita of EUR512 million, or 12.3% of sales, a year earlier.

Analysts had seen the metric at EUR336 million, according to a consensus estimate provided by the company.

Philips expects to book a EUR1.3 billion impairment charge on its sleep and respiratory care business after revising its financial forecast for the unit, it said.

Group comparable sales for the quarter fell around 5%.

For the last quarter of the year, Philips now expects a mid-single-digit decline in comparable sales, it said.

In late July, Philips had guided for 6%-9% growth in comparable sales over the second half of the year.

“Philips still expects a better second half of the year, compared to the first half of 2022. However, the company sees prolonged supply chain disruptions and a worsening macro-environment,” it said.

The company said it expects adjusted Ebita margin to be in the range of a high single to double digit for the last quarter of the year.

Write to Anthony O. Goriainoff at anthony.orunagoriainoff@dowjones.com and Cristina Roca at cristina.roca@wsj.com

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October 11, 2022

Tag: Lodgings/Restaurants/Bars

The Jefferies 18

Screen of consumer discretionary sales growth

The worst-performing S&P 500 stocks of 2022

Another way of measuring the biggest stock-market losers of 2022

The sold-out Cactus Plant Flea Market Boxes, aka McDonald’s “adult Happy Meals,” are popping up on resale sites for thousands of dollars.

The sold-out Cactus Plant Flea Market Boxes, aka McDonald’s “adult Happy Meals,” are popping up on resale sites for thousands of dollars.

How are stock-index futures trading

What’s driving markets

Companies in focus