The impact of total inflation since COVID has outpaced wage growth. The media gives less attention to total inflation compared to the faster-moving inflation data. But both data points affect consumer behavior. The restaurant sector is experiencing demand shifts.
Restaurant Brands (QSR), which owns Burger King and Tim Hortons, broke out decisively in the summer. Shares are now hovering near the bearish “double top” price of $82. Consumers gave strong ratings for Burger King’s hamburgers. By comparison, McDonald’s (MCD) continued to post weak quarterly revenue. Demand for its higher-priced hamburgers is weakening.
Wendy’s (WEN) recognized that its burgers needed better quality. Its CEO, Bob Wright, admitted that the firm chose to seek cost savings and efficiency over ingredients. It will fix that decision by improving burger quality, operational efficiency, and better service standards.
Dutch Bros (BROS) peaked at $74.02 in early summer. Shares slumped in the $45-$50 range recently when investors refused to pay for the stock premium. The P/E ratio is still over 65 times. The price of coffee and other commodity costs are pressuring profits while sales growth has slowed.
Your Takeaway
Readers should continue to avoid Dutch Bros stock. The stock risks falling back to the 2023-24 range at $23 - $29.
MCD stock yields nearly 3.0%. But higher interest rates suggest that investors should demand a 3.5% yield.
QSR stock might hold its premium valuation. At this stock price level, the upside is minimal.
