What Happened

Shares of Texas Roadhouse (TXRH 1.83%), BJ's Restaurants (BJRI 0.73%), Darden Restaurants (DRI 1.20%), and Dave & Buster's Entertainment (PLAY 5.37%) all fell by double-digit percentage rates on Monday.

Specifically, by the time the market closed, this is how much these restaurant stocks had fallen:

  • Texas Roadhouse: 10.9%.
  • BJ's Restaurants: 13.1%.
  • Darden Restaurants: 12.2%.
  • Dave & Buster's Entertainment: 20.7%.

Here's a look at why these shares are down so sharply.

A chef serving two customers at a restaurant

Image source: Getty Images.

So What

Of course, the primary reason for these stocks' declines on Monday is a huge pullback in the overall stock market. Highlighting the turmoil in the market, the S&P 500 was slammed on Monday, declining 7.6%, bringing the S&P 500's total decline since Feb. 19 to 18.9%. The market's sell-off represented the worst day for the Dow Jones Industrial Average since 2008. The market index sank more than 2,000 points. 

Of course, all four of these restaurant stocks saw outsize declines on Monday, with Dave & Buster's falling the hardest. This adds to a massive decline in the prices of restaurant stocks over the past few weeks. Shares of Texas Roadhouse, BJ's, Darden, and Dave & Buster's have fallen 26%, 37%, 40%, and 47% since Feb. 19, respectively.

Now What

Since the main reason for the market's overall sell-off in recent weeks is the coronavirus outbreak, it's not surprising to see restaurants that make money from dining-in customers taking a hit. In general, companies whose primary business requires the gathering of people in proximity with each other have been hit particularly hard during this market correction. Investors are betting that these companies will be negatively affected by the coronavirus as consumers avoid areas in which they may be more likely to be exposed to the virus.

Conversely, some stocks that don't require physical gatherings and even benefit from virtual communication have performed better than the overall market during this timeframe. Shares of virtual collaboration companies Slack (WORK) and Zoom Video Communications (ZM -1.23%), for instance, have declined only 10.2% and 8.6% since Feb. 19.

While investors should keep an eye on the coronavirus to see whether it keeps spreading rapidly, they should also consider that this could be a buying opportunity. All four of these stocks now trade at conservative price-to-earnings ratios relative to their recent earnings growth.