What Happened?
Shares of casual restaurant chain Portillo’s (NASDAQ: PTLO) fell 3.7% in the morning session after B of A Securities downgraded the stock from a "Buy" to a "Neutral" rating and slashed its price target.
The investment firm cut its price projection for the stock by 50%, lowering it from $14.00 to $7.00. This followed a recent quarter where the company's revenue, while up 3.6% from the previous year to $188.5 million, missed analysts' expectations. Portillo's also logged a slight miss on its same-store sales estimates, contributing to a re-evaluation of the stock's outlook.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy Portillo's? Access our full analysis report here.
What Is The Market Telling Us
Portillo’s shares are very volatile and have had 29 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 12 days ago when the stock gained 3.2% on the news that the stock rebounded from a sell-off in the previous trading session, which was prompted by the immediate departure of its President and CEO, Michael Osanloo.
The board appointed its Chairman, Michael A. Miles, Jr., as the Interim CEO. In a statement, the company acknowledged that its “recent performance has not measured up to expectations.” The leadership shake-up followed pressure from activist investor Engaged Capital. This development occurred after the company had already cut its full-year guidance for same-store sales, shifting from expected growth to a projected decline. The stock had fallen on the initial news, and the subsequent recovery suggested that investors may have viewed the prior day's sell-off as excessive or saw the management change as a necessary step for a potential turnaround.
Portillo's is down 30.2% since the beginning of the year, and at $6.47 per share, it is trading 57.9% below its 52-week high of $15.39 from February 2025. Investors who bought $1,000 worth of Portillo’s shares at the IPO in October 2021 would now be looking at an investment worth $222.43.
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