What Happened?
Shares of fast-food chain Jack in the Box (NASDAQ:JACK) fell 7.3% in the morning session after Stifel reiterated its 'Hold' rating, citing significant concerns about the company's same-store sales weakness.
The investment firm highlighted that ongoing immigration policy challenges are likely to create sustained sales pressure for the fast-food chain. This follows Jack in the Box's recent third-quarter earnings report, which missed analyst expectations on both revenue and earnings per share. The company specifically noted a 7.1% downturn in Q3 same-store sales, attributing it to a noticeable drop in spending from its core Hispanic consumer base. Other analysts share this cautious view. Goldman Sachs maintained its 'Sell' rating, while Piper Sandler lowered its price target, pointing to declines for both the Jack in the Box and Del Taco brands. These headwinds are occurring as the broader fast-casual restaurant industry faces pressure from inflation, causing consumers to trade down or eat out less.
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What Is The Market Telling Us
Jack in the Box’s shares are extremely volatile and have had 37 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 2 days ago when the stock dropped 3.5% as investors reassessed the company's recent weak second-quarter financial results. The company recently reported a 9.8% year-over-year decline in revenue to $333 million, falling short of analyst expectations. The fast-food chain also posted a miss on its same-store sales and EBITDA (a measure of profitability) estimates. Despite an initial rally following the earnings report, some analysis suggested the stock had become overvalued, with predictions that the stock would open lower on Monday. The session's decline appears to reflect a delayed reaction from the market as it prices in the weaker fundamental performance.
Jack in the Box is down 54.9% since the beginning of the year, and at $18.48 per share, it is trading 64.1% below its 52-week high of $51.52 from November 2024. Investors who bought $1,000 worth of Jack in the Box’s shares 5 years ago would now be looking at an investment worth $217.26.
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