TECHNICALS
At the moment, there is a bull flag that's been forming in the chart, which normally goes up at least the length of the pole.
However, if I use a Fibonacci Retracement from the COVID Crash, the 0.618 level aligns with the 70$ price target.
MACD looks like it's about to cross the signal line, but the RSI is heading towards the overbought zone.
RESISTANCE levels are :
- $47.57 (Nov 5 '19 High)
- $50 which is the most recent high
- $53 - $55 (Previous highs from Nov '16 & Jun/Nov '18) Also aligns with -0.236 Fib Level
- $63.4 (All time High)
- $70
SUPPORT Levels :
- $36.69 (0.236 Fib level)
- $40.66 (Wave IV of Impulse wave and the Higher Low of uptrend)
- $46.04 (Level before COVID Crash)
* Keep in mind as supports fail and resistances break, supports can turn into resistance and resistance can turn into support. *
FUNDAMENTALS
- SECTOR : CONSUMER SERVICES > RESTAURANTS
Consumer Services Sector is up 13.01% Yearly with Restaurants up 10.86%, underperforming the sector due to Cable/Satellite TV (+25.5%) and Other (+53.64%), but outperforming other Industries like
Broadcasting, Casinos/Gaming, Hotels/Resorts/Cruise Lines, Media Conglomerates, Movies/Entertainment, and Books/Magazines.
https : // imgur . com /a/t916FTp (Need higher reputation for links, sorry!)
Source from Tradingview as of 10/9/20
- FINANCIALS
"Last EPS Surprise greater than or equal to 10%: Stocks delivering positive surprise in the last quarter tend to surprise again."
Expected EPS of Q4 2020 was : -1.47
Reported EPS of Q4 2020 was : -0.88
% Surprise : 40.14
https : //imgur . com /a/rMyVPEM
Source from Market Watch
They have consistently exceeded expectations with the exception of Q1 2020 where they matched analyst estimates at $0.41.
"Next 3–5 Years Estimated EPS Growth (Per Year) greater than 10%: Solid expected earnings growth exhibits the stock’s long-term growth prospects."
2020 EPS Consensus Estimates : $2.20
2021 EPS Consensus Estimates : $3.12
2020 EPS Consensus Estimates : $3.24
https : // imgur.com /a/fs1swEH
Source from Market Watch
Source : https : //w w w. nasdaq . com/articles/top-5-stocks-with-solid-earnings-beat-potential-2020-10-09
https: // w w w. nasdaq. com/market-activity/stocks/eat/earnings
- SALES, REVENUE & EXPENSES
https : // imgur.com /a/NygiNFE
Source Image
Sales in the most recent quarter have declined by %34.51 mainly due to COVID-19 lockdowns and limited capacity.
As you see in the earlier quarters, Sales/Revenue were steadily around 800M before the pandemic.
As lockdowns and capacity restrictions are being lifted with social distancing still applying, I think we can see an increase in sales and revenue, also due to the fact that takeout and delivery have higher demand than before the pandemic.
"Chili’s parent Brinker International is expecting that customers will order more takeout and delivery in the months and years to come than before the coronavirus pandemic."
“I don’t think that we’ll ever go back to the mix we ran prior,” said Brinker CEO Wyman Roberts, who credited the pandemic for pushing many consumers to try delivery through third-party apps for the first time.
"Before the pandemic, only 20% of Brinker’s sales came from takeout and delivery. Roberts said it’s unlikely that number will ever fall that low again, thanks in part to the latest addition to Brinker’s portfolio. "
"During the pandemic, Brinker unveiled its first virtual restaurant brand, It’s Just Wings, through its partnership with Doordash. Chicken wings, fried Oreos and fries are made in Chili’s and Maggiano’s kitchens but are only available for delivery by Doordash. Roberts said that the virtual brand is expected to gross more than $150 million in sales in its first year."
"Roberts said that about half of its sales are now coming from dine-in customers"
"And last year, we integrated DoorDash into our POS system and our e-commerce experience, making it possible to shift our marketing focus from national TV spots to our digital platform, where we continuously test and learn to increase e-commerce conversions. And as a result, our digital sales of off-premise meals have grown from low teens to more than 50% in the fourth quarter with only a slight dip as dining rooms reopen. We have also driven frequency - increased frequency through our takeout and delivery channels at a fraction of the marketing expense. That's the beauty of a digital strategy that makes dining easier and more convenient for guests." said Roberts in the Q4 earnings call.
In the most recent quarter, The cost of goods sold were almost equal to the sale/revenue they generated and the D&A expense cost them 41.4M leaving them with 3M gross income compared to the same quarter with 111M last year, but it most likely has to do with the effects of the coronavirus since this period was from March 31 to June 30. I believe that the next quarter, we will see these numbers go up
"And with our operators' disciplined margin management, we delivered positive cash flow for the quarter, which we used to pay down debt. Our debt load is now below our pre-pandemic level. We continued this momentum into July, ending the month with Chili's down just 10.9%. And in the 84% of our company-owned restaurants with open dining rooms were down just 3.8%, and 36% of our company-owned Chili's restaurants ran positive comp sales for the month." said Roberts.
You can see in the image below that the Long Term Debt went down from 2.58B to 2.27B totaling a 310M decrease, however their total liabilities went up from 3.16B to 3.17B.
https : // imgur.com /a/DEwrW43
Source
- FUTURE GUIDANCE
Brinker International also launched a virtual brand, Just Wings, to succeed online, in app deliveries as well with their DoorDash integration.
"Because we can meet them where they are, guests use us more. Finally, here's something you haven't heard from anyone else in our space. During the last fiscal week or last week of fiscal 2020, we accomplished something no other restaurant company has ever done. In a single day, we launched It's Just Wings, our first virtual brand, in 1,050 Chili's and Maggiano's across the country. Sales continue to build every week, and we clearly see the potential to exceed $150 million in the brand's first year, which would secure It's Just wings a spot in the top 200 restaurant brands. Over the years, casual dinings has been deemed for being overbuilt. We believe this is our opportunity to prove that maybe it isn't overbuilt, it's just underutilized. It's Just Wings leverages existing buildings, equipment and labor."
"Now as to operating guidance, while in past years, we would typically provide annual guidance for Brinker during this earnings call, potential volatility and unknowns of the current operating environment makes that exercise difficult. Instead, we are providing some limited guidance as to our consolidated performance for the current first quarter and anticipate providing quarterly insights as we move through the year. For Brinker in the first quarter, we expect consolidated comp store sales to be down in the low to mid-teens range." said CFO Joe Taylor.
SUMMARY / TL;DR
From the technical side, there is a bull flag pattern and with bull flag patterns, usually we see at least the next move up the length of the first pole which I believe will be in the $65-70 range and I do expect a run up until earnings.
In the fundamentals, the balance sheet looks good and they are working to pay down debt along with opening a new Just Wings business using existing Chili's and Maggiano's to fulfill the deliveries.
Usually in Q1, they do tend to see lower sales and revenue compared to the Q4 in July but I believe that they will have higher numbers than last quarter.
POSITIONS
Shares
Entry :
- Break of $50 resistance
- Failure to break $50 and retest of $46
- Any support levels listed above
Stop Loss :
- Breaks $50, set to $50
- Bounces at $46, set to $46
- Any break of resistance above turning into support.
Sell :
- Raising stop loss as resistance breaks and turns to support.
- Trim profits before key resistance levels.
Options
Lots of Open Interest in the
$45 Oct 16 '20 Call - 1.3k
$50 Oct 16 '20 Call - 2.2k
$45 Jan 15 '21 Call - 1.0k
However, due to low volume and a wide bid/ask spread, I would prefer going into shares but it's up to you.
First time posting, let me know what you think in the comments!
*Not financial or investment advice*
At the moment, there is a bull flag that's been forming in the chart, which normally goes up at least the length of the pole.
However, if I use a Fibonacci Retracement from the COVID Crash, the 0.618 level aligns with the 70$ price target.
MACD looks like it's about to cross the signal line, but the RSI is heading towards the overbought zone.
RESISTANCE levels are :
- $47.57 (Nov 5 '19 High)
- $50 which is the most recent high
- $53 - $55 (Previous highs from Nov '16 & Jun/Nov '18) Also aligns with -0.236 Fib Level
- $63.4 (All time High)
- $70
SUPPORT Levels :
- $36.69 (0.236 Fib level)
- $40.66 (Wave IV of Impulse wave and the Higher Low of uptrend)
- $46.04 (Level before COVID Crash)
* Keep in mind as supports fail and resistances break, supports can turn into resistance and resistance can turn into support. *
FUNDAMENTALS
- SECTOR : CONSUMER SERVICES > RESTAURANTS
Consumer Services Sector is up 13.01% Yearly with Restaurants up 10.86%, underperforming the sector due to Cable/Satellite TV (+25.5%) and Other (+53.64%), but outperforming other Industries like
Broadcasting, Casinos/Gaming, Hotels/Resorts/Cruise Lines, Media Conglomerates, Movies/Entertainment, and Books/Magazines.
https : // imgur . com /a/t916FTp (Need higher reputation for links, sorry!)
Source from Tradingview as of 10/9/20
- FINANCIALS
"Last EPS Surprise greater than or equal to 10%: Stocks delivering positive surprise in the last quarter tend to surprise again."
Expected EPS of Q4 2020 was : -1.47
Reported EPS of Q4 2020 was : -0.88
% Surprise : 40.14
https : //imgur . com /a/rMyVPEM
Source from Market Watch
They have consistently exceeded expectations with the exception of Q1 2020 where they matched analyst estimates at $0.41.
"Next 3–5 Years Estimated EPS Growth (Per Year) greater than 10%: Solid expected earnings growth exhibits the stock’s long-term growth prospects."
2020 EPS Consensus Estimates : $2.20
2021 EPS Consensus Estimates : $3.12
2020 EPS Consensus Estimates : $3.24
https : // imgur.com /a/fs1swEH
Source from Market Watch
Source : https : //w w w. nasdaq . com/articles/top-5-stocks-with-solid-earnings-beat-potential-2020-10-09
https: // w w w. nasdaq. com/market-activity/stocks/eat/earnings
- SALES, REVENUE & EXPENSES
https : // imgur.com /a/NygiNFE
Source Image
Sales in the most recent quarter have declined by %34.51 mainly due to COVID-19 lockdowns and limited capacity.
As you see in the earlier quarters, Sales/Revenue were steadily around 800M before the pandemic.
As lockdowns and capacity restrictions are being lifted with social distancing still applying, I think we can see an increase in sales and revenue, also due to the fact that takeout and delivery have higher demand than before the pandemic.
"Chili’s parent Brinker International is expecting that customers will order more takeout and delivery in the months and years to come than before the coronavirus pandemic."
“I don’t think that we’ll ever go back to the mix we ran prior,” said Brinker CEO Wyman Roberts, who credited the pandemic for pushing many consumers to try delivery through third-party apps for the first time.
"Before the pandemic, only 20% of Brinker’s sales came from takeout and delivery. Roberts said it’s unlikely that number will ever fall that low again, thanks in part to the latest addition to Brinker’s portfolio. "
"During the pandemic, Brinker unveiled its first virtual restaurant brand, It’s Just Wings, through its partnership with Doordash. Chicken wings, fried Oreos and fries are made in Chili’s and Maggiano’s kitchens but are only available for delivery by Doordash. Roberts said that the virtual brand is expected to gross more than $150 million in sales in its first year."
"Roberts said that about half of its sales are now coming from dine-in customers"
- https: // w w w . cnbc. com/2020/08/13/brinker-expects-high-delivery-takeout-sales-to-continue-post-pandemic.html
Source from CNBC
"And last year, we integrated DoorDash into our POS system and our e-commerce experience, making it possible to shift our marketing focus from national TV spots to our digital platform, where we continuously test and learn to increase e-commerce conversions. And as a result, our digital sales of off-premise meals have grown from low teens to more than 50% in the fourth quarter with only a slight dip as dining rooms reopen. We have also driven frequency - increased frequency through our takeout and delivery channels at a fraction of the marketing expense. That's the beauty of a digital strategy that makes dining easier and more convenient for guests." said Roberts in the Q4 earnings call.
In the most recent quarter, The cost of goods sold were almost equal to the sale/revenue they generated and the D&A expense cost them 41.4M leaving them with 3M gross income compared to the same quarter with 111M last year, but it most likely has to do with the effects of the coronavirus since this period was from March 31 to June 30. I believe that the next quarter, we will see these numbers go up
"And with our operators' disciplined margin management, we delivered positive cash flow for the quarter, which we used to pay down debt. Our debt load is now below our pre-pandemic level. We continued this momentum into July, ending the month with Chili's down just 10.9%. And in the 84% of our company-owned restaurants with open dining rooms were down just 3.8%, and 36% of our company-owned Chili's restaurants ran positive comp sales for the month." said Roberts.
You can see in the image below that the Long Term Debt went down from 2.58B to 2.27B totaling a 310M decrease, however their total liabilities went up from 3.16B to 3.17B.
https : // imgur.com /a/DEwrW43
Source
- FUTURE GUIDANCE
Brinker International also launched a virtual brand, Just Wings, to succeed online, in app deliveries as well with their DoorDash integration.
"Because we can meet them where they are, guests use us more. Finally, here's something you haven't heard from anyone else in our space. During the last fiscal week or last week of fiscal 2020, we accomplished something no other restaurant company has ever done. In a single day, we launched It's Just Wings, our first virtual brand, in 1,050 Chili's and Maggiano's across the country. Sales continue to build every week, and we clearly see the potential to exceed $150 million in the brand's first year, which would secure It's Just wings a spot in the top 200 restaurant brands. Over the years, casual dinings has been deemed for being overbuilt. We believe this is our opportunity to prove that maybe it isn't overbuilt, it's just underutilized. It's Just Wings leverages existing buildings, equipment and labor."
"Now as to operating guidance, while in past years, we would typically provide annual guidance for Brinker during this earnings call, potential volatility and unknowns of the current operating environment makes that exercise difficult. Instead, we are providing some limited guidance as to our consolidated performance for the current first quarter and anticipate providing quarterly insights as we move through the year. For Brinker in the first quarter, we expect consolidated comp store sales to be down in the low to mid-teens range." said CFO Joe Taylor.
SUMMARY / TL;DR
From the technical side, there is a bull flag pattern and with bull flag patterns, usually we see at least the next move up the length of the first pole which I believe will be in the $65-70 range and I do expect a run up until earnings.
In the fundamentals, the balance sheet looks good and they are working to pay down debt along with opening a new Just Wings business using existing Chili's and Maggiano's to fulfill the deliveries.
Usually in Q1, they do tend to see lower sales and revenue compared to the Q4 in July but I believe that they will have higher numbers than last quarter.
POSITIONS
Shares
Entry :
- Break of $50 resistance
- Failure to break $50 and retest of $46
- Any support levels listed above
Stop Loss :
- Breaks $50, set to $50
- Bounces at $46, set to $46
- Any break of resistance above turning into support.
Sell :
- Raising stop loss as resistance breaks and turns to support.
- Trim profits before key resistance levels.
Options
Lots of Open Interest in the
$45 Oct 16 '20 Call - 1.3k
$50 Oct 16 '20 Call - 2.2k
$45 Jan 15 '21 Call - 1.0k
However, due to low volume and a wide bid/ask spread, I would prefer going into shares but it's up to you.
First time posting, let me know what you think in the comments!
*Not financial or investment advice*