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Investors Were Ravenous for These 2 Stocks Wednesday

By Dan Caplinger – Jul 21, 2021 at 6:56PM

Key Points

  • The stock market remained strong on Wednesday, rising on hopes for a full economic recovery.
  • Restaurant stocks did particularly well.
  • Two restaurant stocks were noteworthy for their gains.

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Markets continued to rise.

The stock market continued to rise on Wednesday, giving gains of almost 1% to the Dow Jones Industrial Average (^DJI), S&P 500 (^GSPC -1.79%), and Nasdaq Composite (^IXIC). Sentiment has turned on a dime since Monday's sell-off, and investors seem more confident than ever that the economic recovery can defy threats like rising inflation and higher incidence of COVID-19 infection.

Index

Percentage Change

Point Change

Dow

+0.83%

+286

S&P 500

+0.82%

+36

Nasdaq Composite

+0.92%

+133

Data source: Yahoo! Finance.

Restaurant stocks turned out to be a hotbed of strength on Wednesday. Chipotle Mexican Grill (CMG -2.13%) heated things up considerably, but newer concepts like Kura Sushi USA (KRUS -7.71%) also made waves. Below, we'll look more closely at why both of these stocks are climbing sharply.

Overhead view of eight people at a table with food.

Image source: Getty Images.

Looking spicy

Shares of Chipotle Mexican Grill finished higher by nearly 12% on Wednesday. That was easily enough to take the Mexican food specialist to a new all-time record high, as shares have jumped 33% just since the beginning of 2021.

Chipotle's gains came after strong second-quarter earnings results. The fast-casual chain saw revenue soar 39% from the year-ago quarter, as comparable restaurant sales climbed 31.2%. Chipotle's earnings performance was even more impressive, with adjusted figures of $7.46 per share representing a more than 18-fold jump year over year.

Even with the reopening underway, Chipotle kept making progress with its e-commerce initiatives. Digital sales grew more than 10% from year-ago levels, with more customers taking advantage of the company's "Chipotlane" dedicated pre-order drive-thru service.

Looking ahead, Chipotle expects full-year comparable restaurant sales growth in the low to mid-double-digit percentage range, with 200 or more new restaurant openings. Restaurants are coming back, and Chipotle looks like it's poised to get back to its winning ways.

Nothing raw about this stock

Elsewhere, shares of Kura Sushi picked up 6% in the regular session, and added another 6% after hours. The sushi chain has exploded onto the scene this month, soaring almost 50% just since early last week.

Today's move higher came amid news that a secondary offering of stock from Kura Sushi had gone well. The company said early this morning that it sold 1.1 million shares of stock for $45 per share. That was about 6% below where the stock had closed Tuesday afternoon, but investors nevertheless seemed pleased that the appetite for the offering was as large as it turned out to be.

Like Chipotle, Kura Sushi has seen a nice comeback from shutdown-induced weakness last year. In its most recent quarterly results, Kura Sushi saw sales jump more than sixfold year over year, and adjusted losses narrowed substantially from year-earlier levels. CEO Hajime Uba was optimistic about Kura Sushi's being able to sustain its momentum into next year.

Many patrons are happy to be returning to restaurants after having gone through a year of carryout and food delivery, and restaurant locations are glad to have them back. If those favorable trends continue, it could lead to further gains for Chipotle and Kura Sushi.

Dan Caplinger has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Chipotle Mexican Grill. The Motley Fool has a disclosure policy.

Stocks Mentioned

Chipotle Mexican Grill Stock Quote
Chipotle Mexican Grill
CMG
$1,570.61 (-2.13%) $-34.27
Dow Jones Industrial Average (Price Return) Stock Quote
Dow Jones Industrial Average (Price Return)
^DJI
$34,429.88 (%)
S&P 500 Index - Price Return (USD) Stock Quote
S&P 500 Index - Price Return (USD)
^GSPC
$3,998.84 (-1.79%) $-72.86
NASDAQ Composite Index (Price Return) Stock Quote
NASDAQ Composite Index (Price Return)
^IXIC
$11,461.50 (%)
Kura Sushi USA Inc Stock Quote
Kura Sushi USA Inc
KRUS
$63.94 (-7.71%) $-5.34

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

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