What Happened?
A number of stocks jumped in the morning session after investors cheered a government report showing that inflation remained steady in July. The steady inflation figures have fueled expectations that the Federal Reserve may soon consider an interest rate cut to stimulate the economy, a move that would likely benefit consumer discretionary spending, including dining out.
The July Consumer Price Index (CPI) rose 2.7% from a year earlier, meeting the previous month's pace and coming in slightly below economists' expectations of a 2.8% increase. On a monthly basis, the CPI rose 0.2%, a slowdown from the 0.3% increase seen in June. While the cost of dining out continued to climb, rising 0.3% in July, this was offset by a 0.1% dip in grocery prices, contributing to the overall stable inflation picture. The market's positive reaction sent major stock indexes, including the Dow Jones Industrial Average, S&P 500, and Nasdaq Composite, soaring. This optimism spilled over into the restaurant sector, which has been grappling with a challenging macroeconomic environment marked by high costs and concerns over consumer traffic.
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 Starbucks (NASDAQ:SBUX) jumped 3.4%. Is now the time to buy Starbucks? Access our full analysis report here, it’s free.
- Traditional Fast Food company Krispy Kreme (NASDAQ:DNUT) jumped 5.9%. Is now the time to buy Krispy Kreme? Access our full analysis report here, it’s free.
- Modern Fast Food company Noodles (NASDAQ:NDLS) jumped 6%. Is now the time to buy Noodles? Access our full analysis report here, it’s free.
- Modern Fast Food company Shake Shack (NYSE:SHAK) jumped 3.1%. Is now the time to buy Shake Shack? Access our full analysis report here, it’s free.
- Sit-Down Dining company Bloomin' Brands (NASDAQ:BLMN) jumped 3.6%. Is now the time to buy Bloomin' Brands? Access our full analysis report here, it’s free.
Zooming In On Noodles (NDLS)
Noodles’s shares are extremely volatile and have had 81 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 previous big move we wrote about was 5 days ago when the stock gained 3% on the news that the company announced a change in leadership and postponed its second-quarter earnings report. The fast-casual restaurant chain appointed Joseph D. Christina as its new President and CEO, following the resignation of Drew Madsen for personal medical reasons. In conjunction with the leadership news, the company also rescheduled its second-quarter 2025 financial results conference call, pushing it from August 6th to August 13th. The sudden executive change combined with the delayed financial update likely created uncertainty among investors. This news also followed a period where earnings per share estimates experienced several downward revisions.
Noodles is up 70.2% since the beginning of the year, but at $1 per share, it is still trading 41.5% below its 52-week high of $1.71 from August 2024. Investors who bought $1,000 worth of Noodles’s shares 5 years ago would now be looking at an investment worth $121.36.
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