Oakland restaurant Obelisco returns, but in a different neighborhood
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Business Insider
5 hours ago
- Business Insider
Chipotle (CMG) Stays Premium Despite 25% Stock Plunge
Chipotle Mexican Grill (CMG) shares have tumbled over 25% since its disappointing second-quarter results were published on July 23rd, sending the stock to 52-week lows. The company missed revenue and same-store sales expectations, squeezing profit margins. Yet despite the bruised sentiment and deepening decline, the stock still trades at a relatively premium valuation. Elevate Your Investing Strategy: Take advantage of TipRanks Premium at 50% off! Unlock powerful investing tools, advanced data, and expert analyst insights to help you invest with confidence. While Chipotle maintains strong brand recognition and its position as a category leader presents some appeal for long-term investment, I am Neutral on the stock and prefer to hold off until I see more unmistakable evidence of sustained recovery. Big Burritos Mean Big Business Chipotle has established a dominant position in fast-casual dining. Its model is based on serving customizable Mexican-inspired meals such as burritos, bowls, tacos, and salads. It was an early adopter in the fast-casual space of providing responsibly sourced ingredients that resonate with health-conscious consumers (and who tend to be more willing to pay premium prices). The restaurant chain enjoys a strong brand reputation and a dedicated customer base. It has steadily expanded its market share in the rapidly growing Limited Service Restaurants sector from 22% to 30% over the last ten years. Most recently, Chipotle is pursuing expansion efforts by opening 61 new restaurants during the most recent quarter, with 47 of these featuring the new drive-thru 'Chipotlanes' format. For the year, management projects 315 to 345 new company-owned restaurant openings, with over 80% having a Chipotlane. Recent Financial Performance Lacks Spice Chipotle's Q2 FY2025 results were mixed. The company reported revenue of $3.1 billion, a modest 3% year-over-year increase but falling short of analyst expectations. Somewhat concerning was the 4% decline in comparable restaurant sales, a key metric that reflects weakening consumer demand across existing locations. Profitability took a hit, with the operating margin dropping to 18.2% from 19.7% the prior year, due in part to rising ingredient and labor costs. Yet, earnings per share (EPS) of $0.33 were in line with Wall Street estimates (though it marked a 3% year-over-year decline). In fact, last month's quarterly figures were the 9th consecutive earnings beat in a row, according to TipRanks data. Management has given guidance to expect flat sales for the remainder of 2025 due to ongoing macroeconomic pressures and a challenging operating environment. Rich Valuation with Negative Momentum Chipotle trades at a significant premium to its peers, with a P/E ratio of 37x compared to McDonald's at 25x and the broader restaurant sector average of 15.81x. This premium likely reflects the company's historically strong growth profile, with a return on equity of 43% far exceeding the typical restaurant industry range of 15-30%. However, the company's relatively rich valuation leaves little room for disappointment. The stock currently demonstrates negative price momentum, bearishly trading below major moving averages. Further revenue slippage due to its exposure to consumer spending pressures and cost inflation could continue to depress investor sentiment. Is Chipotle a Good Stock to Buy? Despite the recent stock decline, analyst sentiment toward Chipotle remains cautiously optimistic. The stock is rated a Moderate Buy, with 20 Buy and seven Hold recommendations. CMG's average 12-month stock price target of $59.36 represents a potential upside of almost 40%. Most recently, Morgan Stanley's Brian Harbour reiterated a bullish stance on the stock, with a $60 price target. He noted concerns about short-term demand fluctuations, but believes that these trends may be temporary and that Chipotle remains a benchmark for growth restaurants. Meanwhile, Bank of America's Sara Senatore and Truist's Jake Bartlett have both lowered their price targets on the stock. Senatore maintains a tentative Buy rating, while Bank of America has removed CMG from its 'US 1 List' of best ideas. Similarly, Bartlett has kept a Buy rating on the shares, while lowering the price target from $64 to $60, noting Q2's same-store sales miss and Chipotle's sensitivity to macro factors. However, he believes that recent pricing and an improved guest experience should drive a recovery. The Last Bite on Chipotle Mexican Grill Chipotle is a high-quality fast-casual restaurant operator with reasonable fundamentals and clear long-term growth drivers. Its market leadership, ongoing innovation, and expansion opportunities position it well for long-term growth. Yet, current macroeconomic challenges and the stock's premium valuation warrant a cautious approach. Near-term volatility is likely to continue until the company can show that it can sustain improving sales and profit margins. I remain Neutral on the stock, given its elevated valuation multiple and ongoing uncertainties, and prefer to wait for more substantial evidence of recovery before establishing a position.
Yahoo
18 hours ago
- Yahoo
The two ways Trump's tariffs on Canada could collapse — despite his fight to keep them
WASHINGTON, D.C. — Time's up. On Friday, U.S. President Donald Trump raised the tariff rate on Canadian goods not covered under the Canada-United States-Mexico Agreement (CUSMA) from 25 to 35 per cent, saying they 'have to pay a fair rate.' The White House claims it's because of Canada's failure to curb the 'ongoing flood of fentanyl and other illicit drugs.' U.S. Customs and Border Protection (CBP) data, however, show that fentanyl seizures from Canada make up less than 0.1 per cent of total U.S. seizures of the drug; most smuggling comes across the Mexican border. But the future of Trump's policy also rests on shaky ground, and the tariffs could come crashing down even if Canada can't reach a deal at some point. Imposed through a controversially declared 'national emergency' under the International Emergency Economic Powers Act (IEEPA), the tariffs come with essentially three paths for relief to Canadian exporters and their American customers: the courts and the economy. And there's always the wildcard: that the president changes his mind. Without relying on that, National Post looks at two very possible ways out of all this: The courts: There is a big question hanging over whether Trump's tariffs are even legal under the U.S. Constitution, which gives Congress powers over trade. Trump has bypassed that by claiming he's using presidential IEEPA emergency powers. On Thursday, the Washington, D.C.-based Federal Circuit Court of Appeals convened an en banc hearing for oral arguments in challenges to Trump's use of IEEPA. The 11 judges questioned whether the law meant for sanctioning adversaries or freezing assets during emergencies grants Trump the power to impose tariffs, with one judge noting, 'IEEPA doesn't even mention the word 'tariffs.'' The White House, meanwhile, says the law grants the president 'broad and flexible' emergency powers, including the ability to regulate imports. 'Based on the tenor and questions of the arguments, it appears that the challengers have the better odds of prevailing,' Thomas Berry, the CATO Institute's director of the Robert A. Levy Center for Constitutional Studies, said in a statement. 'Several judges peppered the government's attorney with skeptical questions about why a broad term in IEEPA like 'regulate importation' should be read to allow the president to unilaterally impose tariffs.' Trump's lawyers claim his executive order provides the justifications for the tariffs — in Canada's case, fentanyl. But Berry said 'those justifications would not matter if IEEPA simply does not authorize tariffs in the first place. That is the cleanest and simplest way to resolve this case, and it appears that the Federal Circuit may be leaning toward that result.' A decision is expected this month, and if it's a resounding push back from the judges' panel, said Andrew Hale, a senior policy analyst at Heritage Foundation, the Supreme Court may not even take up the case. If so, he says, 'these Liberation Day tariffs and everything that's been imposed under emergency legislation, IEEPA, that all evaporates.' At that point, the White House would not be able to declare across-the-board tariffs against countries. Instead, it would have to rely on laws allowing tariffs to be imposed on specific products that are found to threaten U.S. national security, like those currently imposed on Canadian steel and lumber. The economy: The other path to tariff relief is through economic pressure. If Americans start to see higher prices and economic uncertainty, and push back at the ballot box — or threaten to do so — it could force Trump to reverse course. The most recent figures show that U.S. inflation, based on the Consumer Price Index, hit around 2.7 per cent in July. That's a slight rise, fuelled by rising prices for food, transportation and used cars. But it's still close to the Federal Reserve target of two per cent. U.S. unemployment rose slightly to 4.2 per cent in July, while far fewer jobs were created than expected, and consumer confidence rose two points but is still several points lower than it was in January. Overall, most economists agree that risks of a U.S. recession over the next 12 months are relatively low, but skepticism over growth remains high. 'Our outlook is for slower growth in the U.S., but no recession,' said Gus Faucher, chief economist of The PNC Financial Services Group. He notes that the 'tariffs are going to be a drag' because they are a tax increase on imports. Economists have said price inflation from tariffs is not yet being felt in the U.S. but believe it's inevitable. 'Trump's tariff madness adds a great deal to the risks of a recession,' said Steven Hanke, professor of applied economics at Johns Hopkins University who served on President Ronald Reagan's Council of Economic Advisors. 'With tariffs, Americans are going to be paying a big new beautiful sales tax on goods and services imported into the U.S., and taxes slow things down. Taxes don't stimulate.' It is surprising that higher U.S. prices haven't happened yet, said Jonathan Gruber, chairman of the economics department at the Massachusetts Institute of Technology. But he explained that it's likely a reflection of the duration of contracts and the fact that import sellers haven't yet put up prices — 'because they were hoping it wouldn't be real, like they'd wake up from this nightmare.' 'I think we start to see the effect on prices by the end of the year,' said Gruber. The trouble for Canada, however, is that the Canadian economy is starting from a much weaker position, with higher unemployment, lower consumer confidence, and a slowing GDP, on top of the trade tensions. So, trying to wait things out for the U.S. to feel the pinch will be even more painful for Canadians. And any American downturn will also reverberate north. 'As Uncle Sam goes, so goes Canada,' said Hanke. Gruber agrees with that, but with a caveat. 'It's all bad in the short run and good in the long run,' he says. He believes the U.S. is 'weak and getting weaker' and that Canada should start taking advantage of how the U.S. is making opportunities for other countries to invest in themselves. 'We're not investing in our future. We're killing our education. We're killing our research. We're not allowing in immigrants,' he said, explaining the weakening of the U.S. economy. 'We're basically setting the stage for long-run economic slower growth.' Meanwhile, China is doubling down on investment, research and other longer-term policies. 'Canada and other countries need to do the same,' Gruber said. And as for when a backlash could lead to a reversal in the U.S., Gruber points to two factors. 'It's got to be high inflation, and Trump's opponents need to make sure that the voters understand that's Trump's fault.' National Post tmoran@ Former U.S. ambassador on Canada negotiating with Trump: 'You may not have the best hand' Carney 'disappointed' after Trump hits Canada with higher tariffs Our website is the place for the latest breaking news, exclusive scoops, longreads and provocative commentary. Please bookmark and sign up for our newsletters here.
Politico
3 days ago
- Politico
Trump issues order imposing new global tariff rates effective Aug. 7
According to the text of the first order, the Trump administration is maintaining its 10 percent so-called baseline tariff on countries where the U.S. has a trade surplus — i.e. it sells more American products to those countries than it imports from them. And it officially imposes the 15 percent rate that Trump agreed to set as part of negotiations with leading trading partners like the European Union, Japan and South Korea. The Philippines, Vietnam and Indonesia also reached tentative agreements with the administration that set their duties at 19-20 percent. Other countries, mainly smaller economies, face far higher rates, topping out at 41 percent for Syria, which is emerging from a civil war, and 40 percent for Myanmar, which is still in the midst of one. The Southeast Asian nation of Laos also faces a 40 percent tariff, and Iraq will be hit with a 35 percent duty. Bigger trading partners like Switzerland also face a significant tariff hike — to 39 percent. Trump also signed a second order raising tariffs on Canada, one of the country's biggest trading partners, from 25 to 35 percent for goods that are not compliant with an existing North American trade deal known as the U.S.-Mexico-Canada Agreement. The senior official told reporters that Canada hasn't 'shown the same level of constructiveness that we've seen from the Mexican side.' Trump announced earlier Thursday that he was maintaining the 25 percent tariff on Mexico for another 90 days after a phone call with their president, Claudia Sheinbaum. Higher tariffs on Canada take effect Friday. The executive actions suggests that Trump decided to punish countries that he did not believe offered enough concessions since the president first threatened to impose his 'reciprocal' tariffs on April 2. 'Some trading partners have agreed to, or are on the verge of agreeing to, meaningful trade and security commitments with the United States, thus signaling their sincere intentions to permanently remedy the trade barriers,' the global order says. 'Other trading partners, despite having engaged in negotiations, have offered terms that, in my judgment, do not sufficiently address imbalances in our trading relationship or have failed to align sufficiently with the United States on economic and national-security matters,' 'There are also some trading partners that have failed to engage in negotiations with the United States or to take adequate steps to align sufficiently with the United States on economic and national security matters,' it continues. White House officials said Thursday night that they expect to strike additional agreements with countries ahead of the new Aug. 7 implementation date for the tariffs. 'We have some deals, and I don't want to get ahead of the president on those deals,' the senior administration official told reporters. 'I'll just say generally, we have more to come.' Taiwan is hoping to be one of those countries. The semiconductor powerhouse faces a 20 percent tariff in a week's time, but in a statement released late Thursday, Taiwanese President Lai Ching-te suggested the rate was 'provisional.' 'Due to the procedural arrangement of the negotiations, the Taiwan-U.S. sides have not yet concluded the final meeting. Therefore, the U.S. has temporarily announced a 20% tariff rate for Taiwan,' President Lai said. 'Once an agreement is reached in the future, there is hope that the tariff rate can be further lowered. Both sides will also continue negotiations on supply chain cooperation and issues related to Section 232 tariffs.'
