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34,000 Thursday – Dow Back to Testing the Highs

15% over the 200-day moving average is a rare thing.

That's where we are now on the Dow, which is over 34,000 again.  Are things really 15% better than they were in November, when we last tested the 200 DMA?  Well Trump is no longer President and the virus is diminishing (in the US, in the rest of the World it's still a disaster) - those are good things

However, it's already the end of April and Q1 has not been generally better than Q1 of last year, when we entered lockdown.  Chipotle (CMG) beat expectations last night, as did Kinder Morgan (KMI) and Whirlpool (WHR) but Las Vegas Sands (LVS) is still in very bad shape and this morning American Airlines (AAL) took a massive $4.32 loss per $20 share while our favorite airline, Alaska (ALK) "only" lost $3.51 per $70 share.

T beat, CLF beat by a mile, BIIB out of the ballpark, DHI massive beat, Valero (VLO) massive miss – the stimulus is having a very uneven effect on industry but clearly Mass Transportation and Hospitality are suffering the most still.  Tonight we hear from our Stock of the Year, Intel (INTC) but they have already gone to the moon since we picked them in November.  Boston Beer (SAM), Mattel (MAT), Seagate (STX) and Sketchers (SKT) also report this evening with American Express (AXP), Honeywell (HON) and Schlumberger (SLB) reporting tomorrow.

Image

Nothing seems to matter to the market as it only goes in one direction these days.  That's why we made an aggressive play on AT&T into earnings yesterday in our Live Member Chat Room ahead of their report:

T/Rick – Still underpriced at $30.05 so I'd just buy the 2023 $30 calls for $2.50 and, if T goes up, you can either take a quick profit or sell $35 calls (now $1.15) and turn it into a cheap spread.  If it goes up a lot, that's all there is to do but if it's flat or down, then you can also sell puts like the $27 puts, which are now $2.70 and then you have a free set of $30 calls or a credit if you do the bull call spread or you can spend the credit and have the $25/35 spread with the short puts for about even.

That should pay off very nicely this morning as T is popping about $1 (3%) off the report.  The 2023 $30 calls hav an 0.55 delta, so they should be a bit over $3 for a quick 20% gain and we can take that off the table, wait for it to go higher or sell the $35 calls for $1.50, leaving us with a net $1 entry on the $30/35 bull call spread and we can pay for 15 of those by selling 5 of the $30 puts for $3.70 ($1,850) and still have a net credit.  Then the worst case is you end up owning T at net $31 (where we are now) or, over $35, you make $5,350 in profit.

We've been discussing overall earnings this week and Societe General's Albert Edwards decided he agrees with me that we're heading for a correction bases on runaway valuations, as evidenced by this chart: 

We didn't collaborate but we both came up with the same base valuation for the S&P – which I discussed with our Members in yesterday's Live Trading Webinar (replay here).  Edwards also notes that while people may say valuations don't matter, in the long run "profits do (sort of).  "Taking analysts’ typically overoptimistic 18-month forward earnings and rebasing them to the same level of the S&P 30 years ago, we can see that a huge gap has opened up," he said.  Earlier this week, BofA outlined three indicators to watch for a "tactical correction."

Be careful out there,

- Phil

 


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  1. Good Morning.




  2. Good morning!

    A bit of selling right at the open, we'll see how that goes.  Dips have not been lasting recently.  

    547,000 lost their jobs last week – that was expected, continuing claims at 3.67M, also expected – both improving.

    Home Sales were in-line and Leading Indicators way up. 


  3. WTRH is interesting as they are well-backed but have a far, far lower valuation than DASH or GRUB:

    And they have options so a fun play for our Future Is Now Portfolio:  

    • Buy 50 WTRH 2023 $2 calls for $1.50 ($7,500) 
    • Sell 50 WTRH 2023 $4 calls for $1 ($5,000) 
    • Sell 20 WTRH 2023 $3.50 puts for $2 ($4,000) 

    That's a net $1,500 credit on the $10,000 spread so $11,500 (766%) upside potential at $4 and worst case is we own 2,000 shares of the stock at $2.75 ($5,500) so great potential reward vs risk.  

    Waitr Holdings: Worthy Of Investment

    Waitr Holdings: Cheap, Growing, And Profitable, Unlike Its Peers

    Record Revenue And Profitability – Waitr Holdings Is A Strong Buy

    Waitr Holdings: A Compelling M&A Target In The Consolidating Meal Delivery Market


  4. PHIL/IBM

    Thx for prev interesting suggs about IBM.

     

    30 IBM '23 $100c ($27.5)

    -30 IBM '23 $140c ($12)

    32 ’22 $120c ($16.6)

    32 ’23 $115c ($26)

     

    -8 ’22 $140c ($11.5)

    -5 Jul’21 $130p ($5)

    -5 APR $120p ($6.6)  (expired)

    -10 ’22 $100p ($10)

     

    Am in the middle of a couple of slo-mo/frozen IBM rolls, from 32 long ’22 $120s down to ’23 $115s, IBM still rising so haven’t sold the $120s yet. Bought back 5 Apr $125 short calls for $10 but didn’t sell your suggested 10 July $135s yet, now thinking maybe sell $140s or even $145s? Sell more covers?  Thoughts?

     

    THX!


  5. wing would sell some more Jun21 140 calls for 4.60


  6. IBM/Wing – They are fairly priced around here.  In the LTP, we only have the $100/125 bull call spread so this is miles over our target but I think $150 is a fair top for them.  I don't understand what you can do with the 2022 $120 calls other than lose money.  At $23.50, that's tying up $75,200 to do what?  Same goes for the 2023 $100 calls, now $42.25 ($126,750) – surly you have something better to do with $200,000 than make $50,000 only if IBM goes up $10?   So let's say it's ridiculous not to cash those for $200,000 and that leaves you with the 2023 $115/140 bull call spread that's 100% in the money for $75,000 and you've sold 18 short calls you'll have to roll along and the short puts have already died of natural causes so why not man up and sell 10 of the 2023 $120 puts for $10 to put an extra $10,000 in your pocket?  

    So that's it an you can go find something else to invest $210,000 in to make $50,000 or, if you are jonesing for more IBM, the 2023 $135 ($17.50)/160 ($8) bull call spread is just $9.50 so that would turn $50,000 into $125,000 at $160.

    • The major averages are mixed and have had trouble gaining traction to the upside or downside.
    • The S&P 500 (SP500) is flat, the Nasdaq (COMP.IND) +0.1% is higher and the Dow (DJI) -0.2% is lower, with Dow Chemical a drag.
    • The raft of earnings has come in mostly better than Wall Street expectations, but that's not moving the needle much in a broader market close to record highs.
    • Cautious guidance from companies still unsure of market conditions as the reopening moves on may not be sitting too well with investors.
    • Earnings guidance "appears to lean more conservative than our economic projections suggest," Wells Fargo Senior Global Market Strategist Scott Wren writes in a note.
    • One earnings outperformer is AT&T, with shares up near 10-month highs on strong streaming results.
    • There's not much of a trend in the S&P sectors.
    • Three of 11 are higher, with Industrials (NYSEARCA:XLI) at the top. Fellow cyclical Materials (NYSEARCA:XLB) is at the bottom.
    • info Tech (NYSEARCA:XLK) is little changed, although Micron is the biggest decliner in the S&P on reports of cautious comments from Cleveland Research.
    • The megacaps are mostly lower now, and Tesla is adding some downward pressure to the market after a Model Y was tricked by Consumer Reports to drive on autopilot without anyone in the front seat.
    • Monthly fund flow data helps shape the market landscape in identifying future developments and insights that investors can use to capitalize on.
    • In a recent note by Wells Fargo, investors learned that ETFs and open-ended mutual funds combined for the largest net inflows for the month of March. March saw $149 billion in inflows, and markets have not seen that level in the last ten years.
    • When examining the active and passive front, March saw the lion's share of inflows go to passive funds versus active funds. Passive funds for March attracted inflows of $109 billion, which is significant as it is the highest in five years.
    • Active funds, which, although were not nearly as high as passive funds, still pulled in $40 billion.
    • Below are the largest passive and active ETFs with regards to assets under management.
    • Passive: SPDR S&P 500 Trust ETF (NYSEARCA:SPY)+0.12% on the day and +11.28% YTD.
    • Active: ARK Innovation ETF (NYSEARCA:ARKK) +1.85% on the day and -2.14% YTD.
    • In the latest U.S. weekly fund flow insight report by Refinitiv Lipper ending April 14th, 2021, data points to the fact that investors were net redeemers of fund assets for the first week out of the past ten.
    • Tesla (NASDAQ:TSLA) price target raised to $900 from $880 by Morgan Stanley's Adam Jonas.
    • Developing story ..
    • Consumer Reports says its engineers tricked a Tesla (TSLA -0.8%) Model Y this week so that it could drive on Autopilot without anyone in the driver's seat as would be required. CR says it made several trips across a half-mile closed test track with the Model Y automatically steering across painted lane lines without a warning or indication that the driver's seat was empty.
    • In a crude hack of the Model Y sensors, a Consumer Reports test driver placed a small, weighted chain on the steering wheel to simulate the weight of a driver’s hand, and slid over into the front passenger seat without opening any of the vehicle's doors. He then reached over and was able to accelerate the vehicle from a full stop.
    • It appears the issue could be prevented with a weight sensor in the driver's seat and camera-based systems used by other automakers that can track the movements of a driver's eyes and head position.
    • "In our evaluation, the system not only failed to make sure the driver was paying attention, but it also couldn't tell if there was a driver there at all," notes Consumer Reports' Jake Fisher, who conducted the test. "Tesla is falling behind other automakers like GM and Ford that, on models with advanced driver assist systems, use technology to make sure the driver is looking at the road," he added.
    • Update:  Two Democratic senators want government regulators to develop recommendations for improving advanced driver-assistance systems, including Tesla's Autopilot.
    • Read today's Tesla roundup: Solar products bundled, China blowback fades, Citi still a bear.

    • Coinswitch Kuber, an India-based startup that lets users invest in cryptocurrencies, raised $25M in a new financing round, giving the three-year-old firm a valuation of over $500M, TechCrunch reports.
    • Tiger Global financed the entire Series B funding round, which  comes just three months after Coinswitch Kuber's $15M Series A round from Ribbit Capital, Sequoia Capital India, and Kunal Shah.
    • The startup is seeking to expand in India, the world's second-largest internet market, as the future of private crypto remains in doubt as the the Indian government may propose a ban on mining, trading and holding cryptocurrency.
    • Charles Schwab (SCHW +1.0%) is looking "very closely and cautiously" at the crypto market, executives said on the firm's Spring Investor Update call.
    • Management wants to see more regulatory clarity before offering any cryptocurrency capabilities, they said.
    • With greater regulatory clarity, the company would consider offering capabilities in the crypto space and would be "highly competitive, disruptive, and client-oriented."
    • There are some ways to invest in crypto through a derivative basis through Schwab, and its management is "keeping our eyes closely on whether there will be investment-oriented products, whether in ETFs or others."
    • Earlier in the call, COO Joe Martinetto spoke about increased costs for the TD Ameritrade acquisition but also bigger synergies.

    • The Federal Aviation Administration says 106 Boeing (BA +1.3%) 737 MAX jets have been affected worldwide by the recently disclosed electrical grounding problem as the company continues to work on a fix.
    • Boeing disclosed the problem earlier this month and recommended operators temporarily remove the affected planes from service, and the FAA says "subsequent analysis and testing showed the issue could involve additional systems."
    • In a formal notice to international air regulators, the FAA says 106 planes are covered by the notice, including 71 registered in the U.S., and "all of these airplanes remain on the ground while Boeing continues to develop a proposed fix."
    • The FAA says Boeing's investigation showed the issue could impact the standby power control unit, a circuit breaker panel and main instrument panel, and it "expects to issue an airworthiness directive mandating corrective action before further flight for all affected airplanes."
    • "An explosion in debt to stay afloat during the pandemic will hamper Boeing's recovery for a number of years," Paul Franke writes in a bearish analysis published recently on Seeking Alpha.
    • New data indicates that Johnson & Johnson's (NYSE:JNJ) one-shot COVID-19 vaccine is effective against the South Africa and Brazil variants of the disease.
    • Results published in the New England Journal of Medicine show that the J&J vaccine was 64% effective against moderate to severe disease and 82% against severe/critical disease beginning 28 days post-vaccination with the South Africa variant.
    • With the Brazil variant, those figures were, respectively, 68% and 88%.
    • Overall, the vaccine was found to be 66% effective against moderate to severe disease and 85% effective against severe/critical disease 28 days after innoculation.
    • J&J shares are down 0.6% to $165.63 in afternoon trading.
    • The European Union is considering legal action against AstraZeneca (NASDAQ:AZN) over delays in deliveries of the company's COVID-19 vaccines, CNBC reports.
    • An EU official told the network the bloc is considering the move as a way to ensure future deliveries are met.
    • Some EU ambassadors, however, are wary of taking legal action as it wouldn't guarantee future doses and it could further reduce public trust in the vaccine, according to Politico.
    • The EU has a contract for 400M AstraZeneca doses.
    • Yesterday, the EU said that it would not exercise options to buy hundreds of millions of additional doses of vaccine from AstraZeneca or Johnson & Johnson.
    • AstraZeneca shares are down 0.2% to $53.02 in afternoon trading.

    • Solar stocks including Enphase Energy (ENPH +7.2%), SunPower (SPWR +5.1%) and Maxeon Solar Technologies (MAXN +11.9%) post strong gains, buoyed by President Biden's ambitious new emission reduction proposals ahead of this week's climate summit of world leaders.
    • ETFs: TANICLNQCLNPBWACESCTEC
    • SolarEdge Technologies (SEDG +8.6%) is the new top pick in U.S. solar at Barclays, which upgrades shares to Overweight from Equal Weight with a $365 price target, up from $334.
    • SolarEdge is among the strongest positioned solar names heading into the Q1 reporting season, Barclays analyst Moses Sutton says, adding that consensus estimates are too low as upside potential from Kokam pricing and EnergyHub volume is underappreciated.
    • Sutton also raises First Solar (FSLR +5.6%) to Equal Weight from Underweight with an $84 price target, up from $65, saying he does not expect polysilicon pricing pressure to be a "material tailwind" for the company as U.S. imports are dropping and tariffs are still rolling off.
    • The firm also upgrades Array Technologies (ARRY +7.2%) to Overweight from Equal Weight with a $32 target, but downgrades Shoals Technologies (SHLS +0.7%) to Equal Weight from Overweight.
    • First Solar was upgraded yesterday at Bank of America, citing "near-term supply chain constraints for c-Si panel competitors as supporting likely higher than expected ASPs."
    • Charles Schwab (SCHW -0.9%) boosts its expected costs for integrating TD Ameritrade into its business but also increases its estimate for the cost synergies the combined companies will produce.
    • At its Investor Spring Update, Senior Executive Vice President and Chief Operating Officer Joe Martinetto said the integration costs are now expected to reach $2.0-$2.2B, about $400M-$600M higher than its previous estimate.
    • About half of the increase is driven by volume changes and the remainder is for additional work it's embarked to improve client experience and mitigate future risks to its  service platform.
    • The integration, though, is now expected to produce $4.3B-$4.8B of revenue synergies, up $800M from its original projection.
    • Completing the conversion is now expected to take 30 to 36 months, Martinetto said.
    • In its Q1 earnings, reported last week, Schwab noted that its 9% Y/Y increase in adjusted total expenses reflected the impact of surging client activity combined with its already planned spending.
    • During Q1 alone, the company experienced 3.2M new brokerage accounts, higher than for all of  2020, excluding accounts it acquire through M&A.
    • AT&T (NYSE:T) is up 5.1% and hitting its highest point in nearly a year after strong earnings this quarter riding on wireless and streaming gains.
    • The company added a net 595,000 postpaid phone subscribers, with postpaid net adds coming in at 823,000, both figures better than expected. And postpaid churn was just 0.93% (with phone churn at 0.76%).
    • Prepaid added 279,000 net customers. Overall net adds were 3.55M.
    • While video subs continued falling (Premium TV down 620,000), broadband added 46,000 (fiber 235,000).
    • And HBO Max rose to 44.2M domestic subscribers from Q4's 41.5%. Worldwide, the streaming service is up to 63.9M subscribers.
    • Citi's Michael Rollins praised the results, staying positive on revenue growth and noting AT&T is improving its competitive position in wireless while maintaining some meaningful HBO Max growth. He has a price target of $34 vs. a current $31.63.
    • Evercore ISI rates the stock In Line, and acknowledges the results were a beat especially in the mobility area, with subscribers and margins coming in better than the firm expected. It has a $32 price target.
    • Overall, the Street is Neutral on AT&T while Seeking Alpha authors are Bullish. It has a Quant Rating of Neutral.
    • Earnings call presentation

  7. Anyone know what news dropped at 1:06?  Congrats to anyone brave enough to be trading short :)  


  8. Emailmike/news – I'm guessing the combination of GS saying things will get rough down the road, and Biden talking about hiking the capital gains tax. Those both hit at about the same time.


  9. Thanks Snow!  I saw the GS comments but didnt think that would be such a market mover.  Etrade news didnt have anything about the Biden comments :(


  10. Thx Yodi, Phil. Always refreshing to see a familiar pattern in a different way with your perspective, Phil (can I borrow your glasses?).  ;)


  11. Yeah, I don't see anything particular that was shocking at 1pm.  

    • The major averages turned decidedly into the red after  headlines that President Joe Biden is planning on sharply raising the capital gains tax to as much as 43.4% on wealthy Americans.
    • The S&P 500 (SP500) -0.5%, Nasdaq (COMP.IND) -0.4% and Dow (DJI) -0.6% all fell after choppy, non-directional trading for most of the session.
    • Story developing .

    That's why I thought people were crazy not to sell stocks in December – this was bound to happen.

    • Taiwan-based United Daily News reports that United Microelecronics (UMC +1.0%), the region's second-largest foundry after TSMC (NYSE:TSM), is planning on raising prices amid the global semiconductor shortage.
    • The new report backs up DigiTimes reporting last month that suggested UMC and pure-play foundry peer Powerchip Semiconductor Manufacturing would increase prices by 10-20% starting in April.
    • The price change comes as foundries start to allocate capacity for next year, which is happening during a global semiconductor shortage and a drought in Taiwan, which poses a threat to homegrown foundries that use a lot of water to clean equipment and wafers.
    • Will TSMC respond with its own price increase? Earlier this month, TSMC ended its customer discounts, but so far the industry giant has only increased prices for the relatively cheap driver chips and high-voltage components.
    • Upcoming catalyst: UMC will report first quarter results on April 28.
    • Related: Earlier, TSMC's board approved a $2.9B investment to expand its mature technology capacity.
    • The chief medical officer of BioNTech (BNTX +5.0%) Dr. Ozlem Tureci has said that the people who got vaccinated against COVID-19 will likely need a third shot as the immune response against the virus diminishes.
    • Speaking to CNBC, the co-founder of the German pharmaceutical company which co-developed the first FDA-authorized COVID-19 vaccine in the U.S. with Pfizer (PFE -1.5%) said, “We see indications for this also in the induced, but also the natural immune response against SARS-COV-2,”
    • “We see this waning of immune responses also in people who were just infected and therefore [it’s] also expected with the vaccines,” Tureci noted highlighting a need for annual coronavirus vaccinations like seasonal flu shots.
    • Her views are in line with the comments from Pfizer CEO Alfred Bourla who also said last week that the people might need a booster shot within six to twelve months of getting fully vaccinated.
    • Updating the top-line data from the Phase 3 study, Pfizer and BioNTech announced early this month that their messenger-RNA-based vaccine had long-term effectiveness of 91% against COVID-19 from seven days through up to six months following the second dose.

    KaChing for PFE – That's GLOBAL vaccines FOREVER!  

    • Tesla shares briefly turned positive after Morgan Stanley's Adam Jonas raised his price target raised to $900 from $880.
    • Jonas updated his model for Q1 deliveries of 184,800, which are more than 20% above his forecast. He raises TSLA FY21 delivery forecast by 3% to 809K units.
    • He writes that investor sentiment that Tesla's outlook in China is being "dialed back" is a good thing as he believes that market expectations for China in long term are "are quite a bit too high, in our view."
    • Earlier,  two Democratic senators want government regulators to develop recommendations for improving advanced driver-assistance systems, including Tesla's Autopilot.
    • Consumer Reports also reported that its engineers tricked a Tesla Model Y this week so that it could drive on Autopilot without anyone in the driver's seat as would be required. 
    • BTIG says it is hard to find any holes to poke in the Chipotle (CMG -1.2%) growth story.
    • The reiterates a Buy rating on CMG after taking in the Q1 earnings report and raises its price target to $1,725 from $1,600.
    • Analyst Peter Saleh: "We expect the combination of healthy double-digit comps and higher delivery prices to drive full-year restaurant margins to their best finish since before the food safety crisis. We believe there could be upside to unit development this year and remain optimistic about Chipotlane conversions, which we believe could allow the company to operate as many as 1,000 drive-thru locations by 2025. We view the conversion potential as an underappreciated aspect of the story that should build in the coming years; the strong near-term momentum, unfolding sales drivers and long- term positioning keep us positive on shares and lead to our higher price target."
    • Of note, BTIF says the quesadilla menu addition is driving a mid-to-high single digit sales benefit.
    • Chipotlanes were discussed during CMG's earnings call.
    • "We also continued to see outsides digital performance in Chipotle lanes, which have revolutionized the drive thru experience towards order ahead for pickup transactions, which is our most profitable channel," noted CEO Brian Niccol.

    So there are 2,724 CMGs including malls, food courts and such and this guy thinks more than 33% of them can add drive-throughs and that adding a drive-through increases sales?  CMG is mostly take-out anyway so people will just stay in the car instead of walking inside but will it actually bring more business in?  Apparently, 70% of MCD (CMG's ex-parent)  sales are drive-through.

    In 2018, the average serving time for the top 10 fast food chains was at 234.08 seconds. (QSRMagazine)

    In a QSR survey done in 2013, the former fastest serving fast food chain (Wendy’s) clocked in at 133 seconds. Ten years prior, Wendy’s went for a record-setting time of 116 seconds of serving time. (Today)

    Last year, Wendy’s and Burger King were 2nd and 3rd in the ranking, each posting a serving time of 210 and 213 seconds respectively.  (Statista)

    The acceptable time limit with customers is between 3 to 4 minutes. Anything beyond that is unsatisfactory according to experts.

    A SeeLevel HX study made between June 1 to July 30 in 2018 of 10 fast food chain’s speed of service, Burger King came out on top with 193.31 seconds or about 3 minutes and 22 seconds. (QSRMagazine)

    Deterioration in the speed of service times has caused fast food stats to decline in recent years. Despite maintaining its range of 2 to 3 minutes serving time, the fast food industry should not disregard this to sustain consumer satisfaction.

    Last year, 39% more customers used drive-thru lanes compared to 2018 according to a study by the National Restaurant Association. (Forbes)

    Fun facts…

    Glasses/Wing – Can't see without them these days…

     


  12. /NG having a hell of a day:


  13. CMG- no doubt drive thru is what customers want but they are limited adding d/t lanes in many locations as they are landlocked in strips. If newer locations are end units or free standing then adding d/t may be possible but still not a slam dunk as local planning/permitting authorities tend not to like possible curb cuts, turn lanes, congestion, etc. Plus,as you point out, will d/t cannibalize current sit down business? Bottom line , it is still burritos sellng at 70+ p/e. 


  14. from CMG: 

     

    We believe several new menu items, effective marketing, and on-going strength in digital sales, as well as a tailwind from government stimulus payments to consumers contributed to first quarter revenue growth. For Q2, we expect our comparable restaurant sales to be in the range of high twenties to 30% with quesadilla incidence normalizing, and lower marketing investment. Digital sales grew 133.9% year over year to $869.8 million and represented 50.1% of sales. A little more than half of the digital sales were from order ahead transactions as guests increasingly appreciate both the value and convenience offered by this channel, as well as the added convenience of more Chipotlanes. We opened 40 new restaurants during the first quarter and closed five restaurants, bringing the total restaurant count to 2,803. During the quarter, 26 of the 40 new restaurants included a Chipotlane. These formats continue to perform very well and are helping enhance guest access and convenience, as well as increase new restaurant sales, margins, and returns.


  15. CMG/Pstas – Nice summary.  

    CMG/Stock – I have said for years if they added sushi burritos that would be a huge winner.  Same assembly line system, some of the same ingredients (protein is fish) and it draws a totally new crowd.  That's what I would do if I were them.  

    I love these situational reports where they talk about "digital sales up 133.9%" but it's all BS as it simply shifted from in-house to digital as TOTAL SALES were $5.985Bn in 2020 vs $5,586Bn in 2016 and profits were up $6M from $350M to $356M.  The rest is blah, blah, blah.  And they want $42.5Bn at $1,482.  Not $4.25Bn for $350M in profits – $42.5Bn!  

    How was Q1?  $1.74Bn in Revenue – same as it ever was   Profit though was more like $150M so let's give them $600M and say it's only trading at 70x forward earnings.  

    For 2021, management is anticipating the following:

    • Given on-going uncertainty surrounding the future impact of COVID-19 on the broader US economy and any specific impact to our company, we are not providing fiscal 2021 comparable restaurant sales growth guidance
    • Around 200 new restaurant openings, which assumes minimal construction and permit delays related to COVID-19

    CEO:

    Let me now provide a brief update on each of these strategies, which I believe will help fulfill our long-term vision of more than 6000 restaurants, AUVs above $2.5 million and restaurant level margins above 25%. These are, one, making the brand visible, relevant and loved; two, utilizing a disciplined approach to creativity and innovation; three, leveraging digital capabilities to drive productivity and expand access, convenience and engagement; four, engaging with customers through our loyalty program; and five, running successful restaurants with a strong culture that provides delicious food with integrity while delivering exceptional in restaurant and digital experiences.

    Cauliflower rice, which we launched in early January and will continue through mid-May, is continuing to bring in new guests. In addition, we launched quesadilla across the U.S. and Canada as a digital exclusive offering on March 11. This is our first new customizable entrée in 17 years and was the most requested item by guests not on our existing menu. We made sure we took the proper time to develop an excellent product that consumers love and also works well operationally. The end result is a quesadilla that is perfectly crispy on the outside with delicious melted cheese on the inside. My personal favorite is the barbacoa quesadilla.

    Really, $42.5Bn???

    While we've recovered roughly 60% of in-restaurant sales have dining rooms have reopened. We also continued to see outsides digital performance in Chipotle lanes, which have revolutionized the drive thru experience towards order ahead for pickup transactions, which is our most profitable channel.

    So 60% of their restaurants ONLY offer digital sales and they are touting the growth of digital sales as if it isn't forced?  This is fun though.  

    We'll also continue to make important tech investments to create a path for the future. One such example is our recent investment in Europe, an early stage leader in autonomous delivery. Nuro uses robotics in their fleet of on-road, occupantless and autonomous vehicles to deliver everyday consumer goods and we believe has the potential to take the delivery experience to the next level.

    Ru-roh!  

    The first quarter had unusual expenses related to our 2018 performance year modification to account for the unplanned effects of COVID, restaurant asset impairments and closure costs as well as transformation costs, which negatively impacted earnings per share by $0.91, leading to a GAAP earnings per share of $4.45

    So no, they did not make $150M, more like $113M.  Mind the GAAP! 

    Food costs are 30% in Q1, a decrease of 280 basis points from last year that's due to primarily to menu price increases, a mix shift toward higher margin protein and lower waste, which were partially offset by costs associated with cauliflower rice and fewer sales of high margin beverages. In Q2, expect food costs to be in the mid to high 30% range, but the benefit from our delivery menu price increase will be more than offset by seasonally higher avocado prices.

    we increased our delivery menu prices by 4% earlier this month to help cover the higher cost of this premium access point. And we'll continue to evaluate and fine tune our delivery strategy in this dynamic market.

    Our effective tax rate for Q1 was 20.2% on a GAAP basis and 18.5% on a non-GAAP basis. Our effective tax rate benefited from option exercise and share vesting had elevated stock prices. As I'm sure you know, we received a tax deduction for the value our employees received upon option exercise or share vesting, when the net value exceeds the accounting charge of those shares, we'd benefit from a higher tax deduction.

    We also restarted our buyback program in late February when our stock price up and we repurchased $61 million of our stock and average price of $1,425 during the quarter. We had nearly $154 million remaining on our share authorization as of March 31. We expect to continue to opportunistically use excess free cash flow to repurchase our stock.

    This cracks me up:

    David Tarantino

    Great. And then, my other question is on the quesadilla and I guess, from a consumer behavior uptake, it sounds like you're getting a high incidence for that product. Do you have information that would tell you whether that's kind of new customers or incremental customers or existing customers trying the product? I guess, what do you think the incrementality of that might look like?

    Brian Niccol

    Yes. So you're exactly right, David, the incidence is high. We're in that 10% range. I think is what we discovered. And the thing is really exciting is, it's comprised of a lot of new users. So we're seeing two things happen. A lot of new users come into the business, through the quesadilla proposition, and then our existing customers, we're also seeing them utilize that quesadilla platform as part of a new eating occasion.

    So, it was actually our highest penetration of new customers in the month of March, which I think is just a testament to, one, people coming back to the dining rooms, and two, I think, a really meaningful innovation around quesadilla.

    The stock is up about 100% from last year on that "innovation".  

    How long do I put a quesadilla in the microwave if it has cheese in it? -  Quora

    I wonder if she knows this is a $20Bn idea?  


  16. David Tarantino doesn't appear to be speaking English…….


  17. Not to mention Brian Niccol, who absorbed fully his MBA speak lessons- "quesadilla proposition; quesadilla platform; eating occasion"

    Does that not make you cringe?