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Why Del Taco Restaurants Stock Gained 14% in 2020

By Demitri Kalogeropoulos - Jan 4, 2021 at 9:55AM

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The fast-food chain took a hit from COVID-19 closures but rebounded quickly.

What happened

Del Taco ( TACO -0.13% ) shareholders trailed a booming market last year. Their stock gained 14% in 2020, compared to the 16% increase logged by the S&P 500, according to data provided by S&P Global Market Intelligence.

Still, investors are likely pleased with the results, given that the fast-food chain had been down by more than 60% at one point in the year.

A man holding to-go food.

Image source: Getty Images.

So what

Management said in late July that COVID-19 closures had a significant but short-term impact on Del Taco's stores. Sales plunged by over 20% in the four weeks that ended on April 21, but declines improved to 7% in the following month and reached a flat result by mid-June.

Executives said they were "very pleased" with these results, given the geographic focus of the brand in areas like California and Nevada, where outbreaks had been significant. Most of Del Taco's dining rooms were closed for several weeks through the early summer months.

Now what

The rebound momentum continued into the third quarter, but Del Taco struggled with a more competitive selling environment in that period, and investors' lukewarm reception to that report ended up pushing the stock's return just below the broader market.

Del Taco might shift that sentiment when it reports Q4 results, but for now, investors are approaching the stock with caution while they wait for clarity about whether its growth rate is accelerating or heading back toward negative territory.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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