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Why Restaurant Stocks Are Sinking Again Today

By Rich Smith - Updated Mar 11, 2020 at 2:12PM

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Ominous notes on Starbucks help take down shares of Chipotle, Texas Roadhouse, and BJ's Restaurants as well.

What happened

It's official now: the COVID-19 coronavirus is a pandemic.

Today, as coronavirus cases passed 121,000 worldwide, the World Health Organization made the call. And if you think that's bad news for restaurant stocks, you're right.  

As of 1:20 p.m. EDT on Wednesday, shares of Starbucks (SBUX -0.05%) are down 6.7%, Chipotle Mexican Grill (CMG 1.48%) is off 6.4%, BJ's Restaurants (BJRI -3.08%) have fallen 11.5%, and Texas Roadhouse (TXRH -1.35%) is off 12%.

Man reading in a coffee shop wearing a face mask

Image source: Getty Images.

So what

Why are restaurant stocks being so hard hit -- even in a stock market where everything seems to be selling off? The coronavirus is passed from person to person in close proximity to one other. And restaurants (at least those offering salad bars) have "sneeze guards" for a reason. Every time you walk into a restaurant these days, you're going to be immediately reminded of that, and get a reason of your own to walk right back out and not return until this pandemic goes well and truly away.

Now what

This means that today's spring sell-off could well turn into the summer of restaurant investors' discontent -- if perhaps not the fall or winter (we hope). It's part of the reason why, on Tuesday, analysts at two of Wall Street's bigger brokerages cut their price targets on Starbucks stock, warning that the coronavirus effect on foot traffic could linger for some time.  

And yet, one silver lining around this stormy cloud deserves mention: What if fears of coronavirus spreading inside restaurants simply encourage more people to order meals by takeout and delivery? Pandemic or no pandemic, people need to eat, and Americans aren't getting any less lazy. It's going to take more than merely a health crisis of global proportions to persuade people to cook for themselves.

Perhaps, in the middle of this sell-off of restaurant stocks, now would be a good time for restaurant investors to take a closer look at Grubhub (GRUB) and Uber Technologies' (UBER -4.70%) Uber Eats instead.

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Stocks Mentioned

Chipotle Mexican Grill, Inc. Stock Quote
Chipotle Mexican Grill, Inc.
$1,307.26 (1.48%) $19.06
Starbucks Corporation Stock Quote
Starbucks Corporation
$76.39 (-0.05%) $0.04
BJ's Restaurants, Inc. Stock Quote
BJ's Restaurants, Inc.
$21.68 (-3.08%) $0.69
Texas Roadhouse, Inc. Stock Quote
Texas Roadhouse, Inc.
$73.20 (-1.35%) $-1.00
GrubHub Inc. Stock Quote
GrubHub Inc.
Uber Technologies, Inc. Stock Quote
Uber Technologies, Inc.
$20.46 (-4.70%) $-1.01

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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