Wall Street is hungry for gains as a buffet of analyst calls hits the food industry this week.
Argus Research upgraded Wendy’s on its new menu items and a focus on digital, UBS turned bullish on Chipotle on earnings upside and long-term growth outlook, and Deutsche Bank called J.M. Smucker a good short-term buy due to a recent management shake-up.
Speaking with CNBC’s “Trading Nation” on Thursday, Michael Binger, president of Gradient Investments, said Wendy’s and Chipotle look good here, but he sees Chipotle as the better bet.
“It seems like the brand name at Chipotle never really tires with their customer base,” he said.
Although the stock is expensive, he likes the company’s high growth rate and expects to see Chipotle average around 25% earnings growth over the next four years.
“That’s a rarity in this market, so I would fall with Chipotle,” he said. “I think that the premium is warranted.”
Shifting gears to J.M. Smucker, Binger is bearish on the staples stock.
“That’s more of a mature company, and you’re counting on not earnings growth but you’re counting on multiple expansion,” he said. “To me, multiple expansion is a tougher play.”
Gina Sanchez, CEO of Chantico Global and chief market strategist at Lido Advisors, is more bullish on the pantry play.
“I think that this market really is a growth at a reasonable price kind of market, and Smuckers was able to continue to put growth one foot in front of the other all last year — it moved right in line with its growth prospects, so it never got overvalued,” she said in the same interview.
On top of this, the market has been experiencing everything from raw material shortages and supply-chain constraints to an increase in demand, all of which leads to inflationary pressures that can weigh on the wallets of investors. JM Smucker actually raised its prices in August due to the hike in commodity costs.
“To some degree, although nobody loves inflation, pricing power for corporates is actually healthy for earnings expansion,” said Sanchez. “I think that there’s a balance there. Too much of it will kill the market.” But, “the more they can expand that margin, the more you have a chance at multiple expansion.”
Chipotle has fallen 3% in 2021, while Smucker is up 17%.