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Why Habit Restaurants Stock Surged 27% in July

By Joe Tenebruso – Aug 10, 2018 at 10:17AM

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The fast-casual restaurant chain appears to be back in investors' good graces.

What happened

Shares of Habit Restaurants (HABT) soared 27% last month, according to data provided by S&P Global Market Intelligence, following a positive reaction to its investor presentations and an analyst upgrade. 

So what

After a rough 2017 that saw Habit's stock shed more than 40% of its value, the restaurant's shares essentially treaded water until early June. The stock then started to rebound after Habit's presentation at the Baird 2018 Global Consumer, Technology & Services Conference on June 6 and its investor meetings at the Piper Jaffray Consumer Conference on June 7. Investors appear to have liked what they heard from Habit during those talks, and contributor Rick Munarriz identified the stock as a solid buy around that time.

The stock's momentum continued into July and accelerated after Wedbush analyst Nick Setyan upgraded Habit Restaurants from neutral to outperform and raised his price target from $10 to $15. Setyan argued that price increases and delivery options would help to boost sales, margins, and ultimately, profits.

A person drawing a chart displaying a steep fall followed by sharp rebound

Habit Resturants' stock rebounded sharply during the summer. Image source: Getty Images.

Now what

Habit's torrid gains have continued so far in August, with the stock surging more than 20% after the company reported strong second-quarter earnings. Revenue jumped 23.4%, to $102.9 million, and adjusted earnings per share came in at $0.08. Those figures bested Wall Street's expectations for revenue of $99.7 million and adjusted EPS of $0.03.

"We are pleased with our second quarter results, which included a return to positive same-store sales growth," CEO Russ Bendel said in a press release. "We believe our results reflect progress on our key initiatives laid out earlier this year around convenience, quality, and innovation." 

If Bendel and his team can continue to make progress in these areas while executing Habit's expansion plan, investors may be in store for more gains in the months ahead.

Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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