Scott R. Grossman
Founder of Vindico Capital, Consumer-Sector Investor
Jersey Mike's looks expensive relative to its remaining growth runway, with far cheaper opportunities elsewhere in restaurants, food and consumer. It trades at 25x EBITDA with a maturing store fleet and leverage above 4x, and most of the IPO proceeds go to cashing out its private-equity owner. The chain is no Subway copy; it is a Subway killer, just priced too richly. x.com x.comÂ
Jersey Mike's is a stock to avoid despite good sandwiches. The IPO is mainly insiders selling, the implied valuation is about $8 billion for a company that is not profitable, and most of the balance sheet value is intangibles. As @TMFJaguar notes, that is what has come to be expected from a private-equity IPO. x.com x.comÂ
BJ's Restaurants is overvalued because poor returns on new restaurants keep it from growing, yet the market grants it a higher multiple than Microsoft and 1.5x that of many SaaS companies. The relative valuation is appalling. x.comÂ
Jersey Mike's has much bigger potential than SpaceX had because it is IPOing into perhaps the start of a run in restaurant stocks. SpaceX listed at the end of the space theme and then collapsed, and Cerebras listed at the end of the semiconductor run. Few people care about the Jersey Mike's IPO, while everyone knew about SpaceX's, which supports the setup. x.com x.comÂ
Shake Shack is starting to look cheap after a sharp selloff on beef-cost and consumer worries, despite solid growth and margins. Q2 revenue grew 17.2%, restaurant-level margins reached 23% and free cash flow is positive. It owns no real estate, so it is a bet on the brand, restaurant economics and expansion across its 703 restaurants. The key question is whether those margins hold as it grows. x.comÂ
Restaurants are struggling, making Red Robin unattractive to own. Former restaurant ownership and complaints from restaurant-owner friends underpin the short view. x.comÂ
Backblaze and JMKE are making new highs that look unbuyable, which often marks the best stocks early in a new rally. Holders sitting on profits are content not to sell, many would-be chasers are scared off because the stock already looks too high, and the move puts it on more radars until the fear fades, greed sets in and chasing picks up. x.com x.comÂ
Yesway's IPO looks unappealing: its financials, debt and business model are unimpressive, and its Texas-heavy Allsup's stores lack the differentiation of Casey's food or Murphy USA's no-interior format. Ordinary convenience stores are struggling, with many 7-Elevens and Circle Ks closing. It first filed for an IPO in October 2021 but never completed it. It isn't fully ruled out. x.comÂ
Portillo's is a case of insiders dumping shares on public markets, and its struggles reflect incompetent management. Founder Dick Portillo sold out to private equity in 2014, which then unloaded the company on public investors. Five years after the IPO, its roughly $8 million average unit volume still has not produced profits. x.com x.com x.com x.comÂ
Restaurant stocks, including Chipotle and Wingstop, are uninvestable right now, with too many better places for money. Most have slowing growth, rising costs and poor margins. Wingstop's growth and margins look better than most, but it is still not a buy. x.com x.comÂ
Suja Life is a flawed investment because it is more expensive than it looks and has a cash-flow problem. EBITDA is not FCF: cumulative free cash flow has been negative for years, and forward numbers already trail S-1 guidance. Debt is high even post-IPO, and its Slice soda would need marketing it cannot fund against Poppi, Coca-Cola and PepsiCo. The 60%+ PE owner and its ownership and tax agreements favor the sponsor over common holders. It may bounce near the lockup, but is no long-term hold. … Show more
