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April 17, 2021, 10:41 a.m. EDT

America is set to reopen on July 4 and restaurants are poised to benefit from a desire to ‘get out and gather,’ says JPMorgan

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Tonya Garcia

JPMorgan analysts said that with the U.S. set to be open again on Independence Day , restaurants are poised to benefit from a pent-up desire to dine out, which has been restricted because of the COVID-19 pandemic.

“Despite a full year later than earlier expectations, we still believe July 4 to represent the reopening of America,” analysts wrote in a note focused on the restaurant industry published Monday.

JPMorgan based its reopening day forecast on the progress the country has made so far in beating back the pandemic.

“With ~40% of Americans having at least one vaccine shot and given ~3 million shots administered per day, herd immunity can be expected as early as June,” the report said.

See: Will you vaccinate your kids against COVID-19 once they’re eligible? Only half of U.S. parents say yes

Herd immunity happens when 50% to 90% of the population becomes immune to the virus. Health professionals have said that a vaccination rate of 70% to 80% could bring the nation close to herd immunity.

However, Dr. Anthony Fauci, President Biden’s chief medical adviser, advised during the White House press briefing on Monday that it’s best to focus on getting as many people vaccinated as quickly as possible rather than any particular number.

JPMorgan analysts noted that restaurant seating capacity in major locations range from 25% in California, to 50% in New York City, and 50% in Pennsylvania and Illinois. Florida and Texas are “are now largely back to previous capacity.”

The analysts highlighted sales in March, which were down just 4% from 2019, and sales during the first week in April, which were up 1% compared with the same period in 2019.

Also: Expect ‘eye popping’ sales numbers from consumer companies as calendar laps COVID closures

“Unprecedented stimulus and lack of consumer spending alternatives have led to a major $2.5 trillion-plus increase in savings and what we believe is major pent-up demand to ‘get out and gather,'” analysts wrote.

Among quick-service names, Wendy’s Co. /zigman2/quotes/204070192/composite WEN -1.15% has “notable” upside, McDonald’s Corp. /zigman2/quotes/203508018/composite MCD +1.00% is a safe bet and Domino’s Pizza Inc. /zigman2/quotes/201587798/composite DPZ +1.01% “remains a secular winner,” analysts said.

JPMorgan also called out Chipotle Mexican Grill Inc. /zigman2/quotes/200781108/composite CMG +1.64% and Shake Shack Inc. /zigman2/quotes/209397077/composite SHAK +2.47% for their growth potential.

Analysts see room for 6,000 Chipotle locations in the U.S. with 25% margins and sales of $20 billion, and forecast $2.5 billion in sales at 850 Shake Shack locations, plus 1,200 licensed locations in the U.S. and abroad.

Don’t miss: U.S. economy will boom into 2023, but inequality must be addressed: Jamie Dimon in his latest letter to JPMorgan shareholders

And: Citigroup, Wells Fargo, Bank of America, Goldman Sachs, JP Morgan urge shareholders to vote against racial-equity audits

JPMorgan, which rates Chipotle stock neutral with a December 2022 price target of $1,460, isn’t the only research group to take an upbeat perspective on Chipotle.

Raymond James analysts upgraded Chipotle to outperform from market perform in a Monday note, setting a price target of $1,800.

“We believe the company’s sales have fully participated in strengthening industry trends over the last four weeks, likely pushing recent average weekly sales (AWS) in excess of $50,000,” analysts led by Brian Vaccaro wrote.

And UBS analysts say two-year same-restaurant sales momentum will be supported by enhancements in areas like menu innovation and digital.

“Sizable expectations surrounded the lead up to quesadilla launch , and UBS Evidence Lab app data shows an increase in download share beg. around launch date (digital only) and through at least the week of 3/22,” UBS said.

“We view Chipotle as one of the most resilient QSRs [quick-service restaurants] to COVID impacts, but could also see benefit from reopenings & increased mobility.”

See: Chipotle takes another step closer to margin goals with steak price hike: Truist

UBS rates Chipotle stock neutral with a $1,575 price target.

Chipotle stock has gained nearly 11% for the year to date and has nearly doubled, up 95.8%, over the past year.

The benchmark S&P 500 index /zigman2/quotes/210599714/realtime SPX +0.19% is up 10.3% for 2021 so far.

/zigman2/quotes/204070192/composite
US : U.S.: Nasdaq
$ 24.14
-0.28 -1.15%
Volume: 5.72M
June 11, 2021 4:00p
P/E Ratio
37.97
Dividend Yield
1.28%
Market Cap
$5.34 billion
Rev. per Employee
$123,845
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/zigman2/quotes/203508018/composite
US : U.S.: NYSE
$ 236.93
+2.34 +1.00%
Volume: 2.65M
June 11, 2021 4:00p
P/E Ratio
34.45
Dividend Yield
2.18%
Market Cap
$176.79 billion
Rev. per Employee
$96,039
loading...
/zigman2/quotes/201587798/composite
US : U.S.: NYSE
$ 452.96
+4.53 +1.01%
Volume: 459,333
June 11, 2021 4:00p
P/E Ratio
36.74
Dividend Yield
0.83%
Market Cap
$17.59 billion
Rev. per Employee
$285,931
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/zigman2/quotes/200781108/composite
US : U.S.: NYSE
$ 1,366.80
+22.11 +1.64%
Volume: 287,788
June 11, 2021 4:02p
P/E Ratio
95.96
Dividend Yield
N/A
Market Cap
$38.48 billion
Rev. per Employee
$68,007
loading...
/zigman2/quotes/209397077/composite
US : U.S.: NYSE
$ 100.30
+2.42 +2.47%
Volume: 628,406
June 11, 2021 4:00p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$4.22 billion
Rev. per Employee
$70,382
loading...
/zigman2/quotes/210599714/realtime
US : S&P US
4,247.44
+8.26 +0.19%
Volume: 1.69B
June 11, 2021 5:16p
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