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“Don’t confuse schooling with education. I didn’t go to Harvard, but the people that work for me did.” – Elon Musk
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
It’s a mixed picture for US equities this morning, as Dow futures are poised to open down by about 0.4%, while the S&P 500 and Nasdaq are indicated to be higher. Helping to drive the gains in the Nasdaq and S&P 500, shares of Alphabet (GOOGL) are up over 3% after the company reported better-than-expected earnings and sales. To the downside, Tesla (TSLA), another trillion-dollar stock, or at least as of the close yesterday, is down 6% after CEO Elon Musk warned of “a few rough quarters” ahead.
The mixed picture for US stocks follows a positive session in Asia, where the Nikkei rallied over 1.5% while Chinese stocks also finished the session in positive territory as trade deals start to emerge. European equities were also positive on prospects of trade deals ahead of the August 1 deadline. Flash PMI readings for July came in roughly in line with expectations. The ECB also announced its latest policy decision, and as expected, there was no change in rates.
Turning back to the US, another CEO, like Elon Musk, who didn’t go to Harvard, is the current Starbucks (SBUX) CEO and former Chipotle (CMG) CEO Brian Niccol. Since it was announced that the Miami University (Ohio) alum would be leaving Chipotle for Starbucks, the former’s stock has had a rough go, and its four earnings reports since then haven’t been particularly positive either.
After the close yesterday, CMG reported inline EPS on weaker-than-expected revenues. The revenue miss was the fourth straight time it missed top-line expectations, and the stock is on pace to gap down close to 10% at the open this morning. Besides the four straight sales misses, CMG will have now gapped down 5%+ in reaction to three of its last four earnings reports.
Including this morning’s decline, shares of CMG are down over 15% since it was announced that Niccol would be leaving the company. Over that same period, the S&P 500 is up over 18%. All of this also comes after the stock rallied more than 1,000% during Niccol’s tenure as CEO. Whether all of CMG’s problems are a result of Niccol’s departure or he saw the writing on the wall could be up for debate, but his timing was impeccable, further burnishing his reputation. He came into the company just as it was reeling from food safety incidents in 2018, and while he didn’t get out right at the top, he didn’t miss it by much.
The snapshot below from our Trend Analyzer compares CMG to other restaurant stocks in the S&P 500. As of the close yesterday, stocks in CMG’s peer group were all up on the year, but CMG was down well over 10%, and that doesn’t even take into account this morning’s weakness.
Looking at the charts of all six stocks, CMG is also an outlier as no other stock in its group is closer to a 52-week low. SBUX is the second furthest from a 52-week high, so Niccol’s magic doesn’t appear to be coming through just yet.
Speaking of SBUX, the stock has been stuck in a range for the last five years. Just as it was announced nearly a year ago that Niccol would be taking over the company, SBUX was testing the low end of its multi-year range. Since then, the stock has rallied 25%, which is modestly better than the S&P 500, but outside of a brief period earlier this year, the downtrend from its post-COVID high remains intact. Since it was announced that Niccol would be taking over as CEO last August, SBUX has reported weaker-than-expected EPS and revenues in two of the last three quarters, so his move to the CEO seat has yet to show any meaningful impact on results, but the next opportunity will be next Tuesday.
