What happened

Shares of The Cheesecake Factory (NASDAQ:CAKE) fell 12.5% in the first hour of trading on July 28. The big news was the company's after-the-market earnings release on July 27. The funny thing is the restaurant owner's fiscal second-quarter 2021 results weren't bad. And yet investors were still downbeat, anyway.

So what

First a look at the numbers. The Cheesecake Factory's second-quarter fiscal 2021 revenue was up nearly 160% compared to the same quarter of 2020. Comparable-store sales were up 150% quarter over quarter and higher by 7.8% compared to the fiscal second quarter of 2019. Given the pandemic backdrop, the comparison to 2020 was an easy one, but it was nice to see the improvement over 2019, which suggests The Cheesecake Factory's long-term growth hasn't been derailed by the global health scare. Earnings were $0.37 per share compared to a pandemic-driven loss of $1.61 in the year ago period. Taking out one-time items, the company's adjusted earnings were $0.80 per share, which beat Wall Street expectations.

A parent and child sharing food in a restaurant.

Image source: Getty Images.

That's all good news, so why did the stock tank? Obviously, the improvement in The Cheesecake Factory's financial results has been driven by the broad economic reopening that's been going on. In fact, management noted during The Cheesecake Factory's second-quarter earnings conference call that in-person business is back near pre-pandemic levels. But it has been able to maintain a good bit of the takeout business, too, which accounted for around 27% of total sales in the quarter. Looked at on an annualized basis, per-restaurant sales would be around $12 million with $3.2 million of that coming from off-premise sales.

However, there's a renewed concern about coronavirus variants, helped along by yesterday's changes to the CDC's mask guidelines. Although The Cheesecake Factory is upbeat about the future, investors could be worried that in-person dining will start to fall off in the face of increasing coronavirus spread. And while $3.2 million in off-premise sales is nice when you add it to in-person dining, it's not a great revenue run rate if people stop eating in restaurants again. 

Now what

There's one more wrinkle here that has to be taken into consideration: The Cheesecake Factory's stock is up materially since its pandemic lows. In fact, the shares are roughly 25% higher than where they started 2020, before the shutdowns. So a lot of good news has been priced in by investors. That's likely got some people a little more trigger happy than usual, with any potential bad news (like increasing infection rates and stronger mask guidelines) likely enough to result in profit taking. All in, The Cheesecake Factory had a good quarter, but the future is still uncertain enough that investors remain nervous after the stock's strong rebound.

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.