What Happened?
A number of stocks jumped in the afternoon session after Iran announced the reopening of the Strait of Hormuz, which triggered a sharp drop in crude oil prices and signaled an easing of inflationary pressures on operating margins.
For the restaurant industry, lower oil costs translate directly into cheaper delivery and supply chain logistics. Also, decreased fuel prices at the pump act as an effective "tax cut" for consumers, boosting discretionary income and encouraging higher foot traffic for casual and fine dining establishments alike.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks.
Among others, the following stocks were impacted:
- Traditional Fast Food company Jack in the Box (NASDAQ: JACK) jumped 4.2%. Is now the time to buy Jack in the Box? Access our full analysis report here, it’s free.
- Modern Fast Food company Portillo's (NASDAQ: PTLO) jumped 3.9%. Is now the time to buy Portillo's? Access our full analysis report here, it’s free.
- Sit-Down Dining company First Watch (NASDAQ: FWRG) jumped 5%. Is now the time to buy First Watch? Access our full analysis report here, it’s free.
Zooming In On First Watch (FWRG)
First Watch’s shares are very volatile and have had 27 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was 12 months ago when the stock dropped 19.4% on the news that the company reported weak first quarter 2025 results which featured a significant miss on full-year EBITDA guidance and EBITDA that fell short of Wall Street's estimates.
While revenue grew 16% and met estimates, same-restaurant sales barely rose, and traffic actually declined slightly, underscoring a more cautious consumer and softer in-store trends. Overall, this was a weaker quarter.
First Watch is down 17.4% since the beginning of the year, and at $12.70 per share, it is trading 36.8% below its 52-week high of $20.09 from April 2025. Investors who bought $1,000 worth of First Watch’s shares at the IPO in September 2021 would now be looking at an investment worth $573.84.
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