6 Red-Hot Summer Stocks to Buy Before and After Earnings

What a difference a year makes. This time last summer, everything was closed or barely open, people had become frightened to do normal summer activities so there was little travel, especially via the airlines, and overall, it was miserable. While there are some of the COVID-19 issues with the Delta variant, much of the country is vaccinated now. While Los Angeles County has reinstated mask mandates, for the most part those are rare.

While many companies are facing some very tepid comparisons from last summer, one group is expected to post some outstanding results. The analysts at Baird remain very positive on the restaurant segment, especially with dine-in and carry out service available everywhere, The new Baird research report sized up the industry in front of earnings:

We expect most companies to show upside to calendar-second quarter comps/EPS estimates and to signal a solid start to July. We are staying selective with our Outperform ratings partly due to some risks that could lead to a less robust fundamental picture exiting 2021 and entering 2022. That said, the short-term setup seems generally more positive, including for selected, Neutral-rated casual dining names that have pulled back in recent months.

Here we focus on the six stocks that the Baird analysts have rated at Outperform. It is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.

Chipotle Mexican Grill

The remains a favorite destination for those looking to eat out, and the stock is a top pick across Wall Street. Chipotle Mexican Grill Inc. (NYSE: CMG) operates more than 2,400 fast-casual Mexican restaurants offering freshly made burritos, tacos, burrito bowls and salads.

It is 100% company-operated and runs average unit volumes much higher than peers. The company has established a strong foundation with a focus on operations, supply chain and marketing over the past two years. The digital transformation brought about by the pandemic allows Chipotle to leverage its digital ecosystem, the strong mobile app, a rapidly growing loyalty program with over 20 million members in just two years, and third-party delivery and digital drive-thrus continue to drive top-line growth and improving margins.

The company posted incredible results that beat Wall Street’s forecasts for both the top and bottom lines. Sales at restaurants open at least a year grew more than 31%, also coming in ahead of expectations. Many analysts raised their price targets on the stock.

Baird’s price target for the shares is $1,750, while the Wall Street consensus target is $1,769.92. However, Thursday’s closing price for Chipotle Mexican Grill stock was $1,798.40 a share.

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