And why Chipotle and Shake Shack may give investors indigestion.
In theory, demand is evergreen in the restaurant business: We all have to eat. But during the past year many restaurant stocks have taken the kind of plunge that makes fainthearted investors lose their lunch.
Worries about China’s slowdown have buffeted Yum Brands YUM -1.49% —parent of KFC and Pizza Hut—which plans to split off its China business to localize the contagion. Chipotle Mexican Grill CMG -0.65% has grappled with bad publicity from multiple E. coli and norovirus outbreaks, which have helped lop 33% off its stock price. And Shake Shack’s SHAK 0.24% shares have fallen back to earth, plummeting below $35 from over $90, as investors realized that the small burger chain’s growth couldn’t justify its Mars-orbit valuations.
Source: Fortune