What happened

Shares of Chuy's Holdings (NASDAQ:CHUY) rose last month even as there was little news out on the Tex-Mex restaurant chain. An analyst upgrade and hopes for a generous stimulus package seemed to be enough to lift the stock 32%, according to data from S&P Global Market Intelligence

As you can see from the chart below, the stock rose steadily over the course of the month.

CHUY Chart

CHUY data by YCharts.

So what

Chuy's gains came primarily in two separate sessions. First, the restaurant stock jumped 9% on Jan. 6 after Democrats took control of the Senate. The election results increased expectations that Congress would pass a large stimulus package, helping struggling restaurant chains like Chuy's by giving consumers more spending money.

A plate of nachos.

Image source: Getty Images.

Then, on Jan. 15, the stock gained another 9% on an analyst upgrade. Stifel hiked its rating from hold to buy and raised its price target from $23 to $40. Analyst Chris O'Cull cited expected unit expansion and pent-up demand as the pandemic fades later this year. He also sees growth in new units accelerating to 10% annually and predicts better performance for them as the company penetrates existing markets.

The stock continued to gain for the duration of the month, boosted by strong earnings reports from restaurant peers like McDonald's and Starbucks.

Now what

After last month's gains, Chuy stock may be looking a little overheated. It's now up 58% over the past year even as the company is facing significant challenges from the pandemic. Comparable-restaurant sales fell 20% in the third quarter, though the company managed to grow profits as it slashed labor costs and shifted to a new model and limited menu.

For the fourth quarter, analysts expect revenue to fall 24% and for earnings per share to slip from $0.17 to $0.14. While management deserves credit for delivering profitability in difficult circumstances, high expectations are now baked into the stock.

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