What Happened?
Shares of fast-food chain Jack in the Box (NASDAQ: JACK) fell 2.7% in the morning session after UBS lowered its price target on the stock to $17 from $20, citing concerns about sales pressure ahead of the company's fourth-quarter earnings report.
While the investment bank maintained its Neutral rating on the shares, it expressed worries about challenging same-store sales, noting that margins and earnings were likely under pressure. UBS pointed out that investor expectations suggested a sales decline of 7-8%, which was worse than the consensus forecast of a 5.9% drop. Looking ahead to the next fiscal year, the firm anticipated negative guidance on same-store sales, attributing the weakness to sustained pressure from macroeconomic challenges impacting the brand's core Hispanic and lower-income customers.
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What Is The Market Telling Us
Jack in the Box’s shares are extremely volatile and have had 49 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 3.4% on the news that investors continued to pile into value-oriented names amid growing valuation concerns. This shift reflected growing caution over high valuations within the technology and artificial intelligence (AI) spheres. As market participants reassessed risk, they reallocated capital from growth-heavy indices, like the Nasdaq, to companies in areas like industrials and financials, perceived to be more reasonably priced. Contributing to the positive momentum, markets remained hopeful that a prolonged 40-day government shutdown would be over. The U.S. Senate approved a compromise funding package, which was pending a vote in the House. The potential end to the shutdown brought a sense of relief to markets.
Jack in the Box is down 64.5% since the beginning of the year, and at $14.56 per share, it is trading 70.7% below its 52-week high of $49.73 from December 2024. Investors who bought $1,000 worth of Jack in the Box’s shares 5 years ago would now be looking at an investment worth $167.24.
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