Valuentum Exclusive Analysis for the Discerning Investor

Symbol Keyword

Shares of Best Idea Domino’s Pizza Jump Higher!
Image Shown: In the wake of Domino’s Pizza Inc’s stellar fiscal second quarter earnings report published on July 22, shares of DPZ surged higher. We include Domino’s Pizza as an idea in the Best Ideas Newsletter portfolio and continue to be huge fans of the name. On July 22, Domino’s Pizza reported second quarter earnings for fiscal 2021 (period ended June 20, 2021) that smashed past consensus top- and bottom-line estimates with its US same-store sales growing by 3.5% and its international same-store sales increasing by 13.9%. The company noted that last fiscal quarter represented its 41st consecutive quarter of same-store sales growth in the US as its digital and delivery investments over the past decade have really paid off. Domino’s Pizza announced that it had authorized a new $1.0 billion share buyback program after the end of the fiscal second quarter after recently completing its previous $1.0 billion share repurchase program via an accelerated share repurchase (‘ASR’) agreement.

Best Idea Chipotle Rockets Higher!
Image Shown: We include Chipotle Mexican Grill Inc an as idea in the Best Ideas Newsletter portfolio. On July 21, shares of CMG surged higher after the firm reported a stellar earnings report after the market close on July 20. In our April 2021 article covering the company, we highlighted how Chipotle’s management team sees room for the firm to more than double its restaurant unit count in the coming years. Chipotle’s growth runway is immense. The company’s second-quarter earnings report was stellar, and the market continues to warm up to Chipotle’s promising long-term growth story. We are big fans of Chipotle and expect that the firm’s free cash flows will continue to grow at a steady clip over the coming years.

Nike Beats Estimates Aided By Its Omni-Channel Selling Strength
Image Shown: Shares of Nike Inc popped higher after its latest earnings report. On June 24, Nike reported fourth quarter earnings for fiscal 2021 (period ended May 31, 2021) that beat both consensus top- and bottom-line estimates. Shares of NKE popped higher after the report. The top end of our fair value estimate range for Nike sits at $160 per share, meaningfully above where shares of NKE are trading at as of this writing--even after the latest bounce in its stock price.

Lululemon’s Growth Outlook Is Bright
Image Source: Lululemon Athletica Inc – First Quarter of Fiscal 2021 IR Earnings Infographic. Athleisure wear maker Lululemon Athletica recently reported first quarter earnings for fiscal 2021 (period ended May 2, 2021) that smashed past both consensus top- and bottom-line estimates. Its company-operated stores posted net revenue growth of 106% year-over-year as global economies began to recover from the coronavirus (‘COVID-19’) pandemic. The company’s direct-to-consumer (‘DTC’) net revenue grew 55% year-over-year (the e-commerce side of its business) last fiscal quarter, keeping in mind its DTC business more than doubled its net revenues in fiscal 2020. We were impressed with Lululemon’s latest results, and there could be room for shares of LULU to continue climbing higher. The top end of our fair value estimate range sits at $450 per share (well above where LULU is trading at as of this writing).

Best Idea Dollar General Beats Estimates and Raises Guidance
Image Source: Dollar General Corporation – Fiscal 2020 Annual Report. On May 27, Dollar General Corp reported first-quarter earnings for fiscal 2021 (period ended April 30, 2021) that smashed past consensus top- and bottom-line estimates. The company raised its full year guidance for fiscal 2021 in conjunction with its latest earnings report. We continue to be big fans of Dollar General and include shares of DG as an idea in the Best Ideas Newsletter portfolio. Dollar General is a discount retailer that is focused on catering to small cities and towns in the US with populations of 20,000 or less. These are regions where e-commerce operations with a home delivery component have historically had a difficult time meeting customer demand in an economical manner. The discount retailer’s business model has so far proven to be resilient in the face of the proliferation of e-commerce, and we expect that will continue being the case in the coming years.

Dividend Growth Opportunity Home Depot Posts a Solid Earnings Report
Image Source: Home Depot Inc – First Quarter of Fiscal 2021 Earnings Press Release. New home construction activity along with do-it-yourself (‘DIY’) and do-it-for-me (‘DIFM’) activities remains robust in the US, which is great news for Home Depot. On May 18, Home Depot reported first quarter fiscal 2021 earnings (period ended May 2, 2021) that beat both consensus top- and bottom-line estimates. Home Depot’s GAAP revenues rose 33% year-over-year and its GAAP operating income grew 76% year-over-year as the home improvement and construction retailer reported strong demand from both its professional and retail customer base. We're huge fans of Home Depot and include the company as an idea in the Dividend Growth Newsletter portfolio. Shares of HD yield ~2.1% as of this writing.

Nike’s Digital Strategy Supports Its Future Revenue Growth and Margin Expansion Prospects
Image Shown: Since announcing the launch of its Consumer Direct Offense initiative in June 2017, Nike has done a stellar job building its omni-channel selling capabilities. The company’s digitally-oriented direct-to-consumer strategy offers it the opportunity to enhance both its long-term revenue growth outlook and operating margin expansion potential. On March 18, Nike reported mixed earnings though its near-term guidance indicates its financial performance will continue to rebound after taking a beating from the COVID-19 pandemic. As of this writing, shares of NKE are trading in the upper bound of our fair value estimate range, indicating shares are roughly fairly valued at this time. The coronavirus (‘COVID-19’) pandemic has made it clear that companies with strong omni-channel selling capabilities are in a much better position than their physical-store dependent peers. Home delivery, curbside pickup, and order online/pickup in-store represent some of the main ways companies are meeting demand received through their digital platforms. E-commerce demand has boomed over the past several quarters and that trajectory has legs, in our view. Though e-commerce was already steadily becoming a larger part of the global economy over the past two decades (adoption rates vary across geographical regions), the pandemic has accelerated that trend. Nike recognized the need to develop omni-channel selling capabilities earlier than most, and part of that strategy involved building out an ecosystem of mobile apps and related websites. The apparel, footwear, equipment, and accessory company announced its ‘Consumer Direct Offense’ initiative back in June 2017 and the goal is to build up a sizable direct-to-consumer (‘DTC’) business with a large e-commerce component. The company has its fitness apps Nike Run Club and Nike Training Club along with the Nike app, which supports its e-commerce operations, and its Nike SNKRS app that focuses on footwear. Its digital strategy also involved Nike parting ways with Amazon a couple of years ago so Nike could better control its digital strategy. On March 18, Nike reported third quarter earnings for fiscal 2021 (period ended February 28, 2021) that saw its ‘NIKE Direct’ sales grow by 20% year-over-year, hitting $4.0 billion.

Chipotle Improving Its Digital Menu to Support Its E-commerce Growth Runway
Image Shown: Over the past year, shares of Chipotle Mexican Grill Inc have been on an upward tear, supported by the restaurant’s improving omni-channel selling capabilities. Shares of Chipotle Mexican Grill surged higher during normal trading hours March 9 after the firm announced it was adding customizable quesadilla offerings to its digital menu in the US and Canada starting March 11. This offering is only available for customers ordering while using Chipotle’s digital platforms (potentially due to the longer preparation times) and will likely require new cooking equipment at the company’s restaurants. The company offers both home delivery and curbside/drive-thru pickup services (including its order ahead and pickup services) through its digital platform. We continue to be huge fans of Chipotle and include the company as an idea in our Best Ideas Newsletter portfolio.

Starbucks Expects to Recover in Fiscal 2021
Image Shown: Shares of Starbucks Corporation appear fairly valued at this time. The top end of our fair value estimate range sits at $100 per share of SBUX.We're reiterating our fair value estimate of $80 per share of Starbucks, and the top end of our fair value estimate range sits at $100 per share. As of this writing, shares of Starbucks appear to be fairly valued at this time. While Starbucks’ operations are rebounding and its guidance for fiscal 2021 indicates the firm expects ongoing COVID-19 vaccine distribution activities will have a powerful impact on its near-term financial performance, the firm’s current share price already takes into consideration its pending recovery, in our view. We are not interested in adding Starbucks to any of our newsletter portfolios at this time.

Chipotle, Domino's Continue to Deliver for Shareholders
Image Shown: Domino’s Pizza Inc aims to grow its market share in the US by leaning heavily on its delivery and digital operations, a realm the firm has significant competitive advantages in, as compared to leaning on carryout operations at physical stores. Image Source: Domino’s Pizza Inc – January 2021 IR Presentation. In the restaurant industry, one thing the coronavirus (‘COVID-19’) pandemic has made clear is that having drive thru operations, a strong online presence and respectable delivery services will be key to meeting consumer demand going forward. Physical restaurant locations that rely on indoor dinning will become relevant once again when the pandemic is contained, something the ongoing distribution of COVID-19 vaccines should help accomplish, but the use of food/beverage delivery services in a post-pandemic world will likely be greater than that in the pre-pandemic world (both in terms of number of households and the number of times households that use such services in any given period). Omni-channel selling capabilities are essential not just for the retail space but for restaurants as well, particularly fast-causal operations. Placing a greater emphasis on digital marketing campaigns will be essential, too, given the highly targeted nature of these offerings and the wide reach such campaigns generally have. With that in mind, Chipotle Mexican Grill Inc and Domino’s Pizza are two restaurants with stellar omni-channel selling capabilities that have made considerable upgrades to their digital operations during the past few years.