Look, we can spend the whole day trying to figure out if Netflix (NFLX) is still a growth stock or not. Lord knows I heard enough about the slowdown that it's certainly a fun parlor game. Or we can talk the Robinhood names to death, like AMC (AMC) , the troubled cinema chain that just made CEO Adam Aron, chairman. Why not. Has anyone done more to tap his share base for capital to stay alive, even as his stockholders seem like a fleeting bunch as a quarter of the shareholder base seems to turn over every single day. Boy those Robinhoodies love to trade.
But, excuse me, I want to tip my hat to a company that is doing everything right and tell you what everything right means. I want to talk about the star of our show, Chipotle (CMG) , with a stock that was up 12% today, just today on a quarter that explains why stock picking, not the 10 year, not the Fed, not the overall market, but stock picking matters and winning stocks are right under your noses every day.
Before I give you the skinny on Chipotle, a stock I told you would be going to $2000 rather shortly - it hit $1775 today, up $200, let me explain why the market is so confusing to so many. I mentioned Netflix at the top because I heard endless chatter about whether the growth story that is Netflix has run its course. This is something I take to heart having invented the term FANG, leaving out Microsoft for the N of Netflix.
I find that when you are debating if something is a growth company then it's probably not much of a growth company anymore. I think Netflix is terrific but the stock only started going higher last night when the company mentioned that gaming might be coming and that interactivity is the way to go. Whoa, I want content and if they do not have enough winning content to get people to sign up globally then it's a big issue. The fact that it's buying back stock is of no interest to me. I want sign-ups, global sign-ups. I don't' want pull throughs as in the pandemic pulled through subscriptions. I don't want to hear about gigantic runways when the runways are clogged with planes from HBO and Disney+ (DIS) . I just want the Netflix of old where the calls were fun and jovial as the kingpins of entertainment kicked around which of their shows were the favorites this time around. I used to read the Netflix call to my wife because I wanted to persuade her to watch the shows that Reid, liked, Reid Hastings being the CEO of the company.
Not this time.
This time I found myself thinking, oh darned, is this just another entertainment company? So do I rip the N out of FANG and make it something a lot less alliterative like FAAMG? I can't go there yet. And I want to see what a non-COVID production leads to.
But as of last night the term debatable means, its' not debatable. Netflix currently lacks the growth to be in FAANG. I am very sorry.
The Robinhoodies? They want to come up with new companies that might never make a dime or older companies where they can crush those who bet against them. That's why the promotion of Adam Aron from CEO of AMC to Chairman and CEO of AMC passes as a big deal for their premier name. I say that because Aron's great success story is keeping the flame alive by raising money to tide the movie chain over until variants means variety, not illness. The Robinhoodies seemed genuinely confused about the move because the stock had just runover a bunch of new short sellers.
I say, give me a break. I am not interested in no growth situations. I am not interested in zero sum situations.
I am interested in Chipotle.
What happened last night? What did they say that took the stock up 12% in one session and has now gone from the $250s three years ago, when the company was unlucky and had a health crisis? I will tell you what happened.
Culture. That's what happened. This company has a culture of customer-centric innovation that is extraordinary and has been turbocharged by the naming of Brian Niccol as CEO right at the bottom of the chain's stock.
We always hear about these companies that say a crisis is a terrible thing to waste. Most of the time they are just blowing smoke. They aren't when it comes to Chipotle.
When the pandemic hit, Chipotle recognized it had to use every form of technology to make the company as profitable as possible, everything from the best of digital ordering to the creation of their own bots that answer frequent questions to free up people to make great food. They recognized that they could do enough delivery with the DoorDash to get the food where you need it. They recognized that Chipotlanes could be a major source of growth. And they managed to do almost as well with stores closed as they were open. That's extraordinary. In the old days Chipotle restaurants routinely did $2.5 million in volume. That's just an incredible number, amazing versus almost every other chain. But now because of what they learned about technology, including how to build loyalty, 23 million members up from nothing two years ago, they are now setting their sights on $3 million per unit. Yes they learned that much in the pandemic.
You often hear that no one can find workers in the service industries. Perhaps they don't know how to look for them and perhaps people don't want to work for them. Not Chipotle. Their coast to coast Career Day event last week resulted, as Niccol told us on the call, "resulted in us hiring thousands of additional team members to meet current demand and accommodate future growth." How does it happen? How about industry leading benefits including, to quote Niccol, that amount to a "world class value proposition." The company is providing a new virtual mental health platform, expanded debt-free degrees, and significant career advancement capabilities including fast track management positions.
Sure they have some inflation like everyone else including wages that moved to $15 an hour, but that's nothing that a 3.5% to 4% menu price increase couldn't handle. You know if your sales pick up at the same time as your prices pick up you aren't meeting much resistance as stores added $100,000 in sales, even as margins did shrink a tad.
But the most important thing is that unlike almost every company I follow, Chipotle held on to its digital gains after the great re-opening. Was it the cauliflower rice? The lifestyle bowls? The Burritos and Bitcoin promotion?
Nah, it was the whole shooting match, a company that can do $7.43 when Wall Street was looking for $6.49, a company that can easily more than double the number of stores in the country while increasing the amount of many made per store and one that is not speaking Wall Street Silicon valley tech gibberish when it says that during the pandemic Chipotle evolved into "a real food focused digital lifestyle brand."
So yes, debate the growth or lack of that a Netflix has. Ponder how in heck AMC can be worth more than $21 billion even as it fights for survival by taxing its Robinhoodie shareholders. Or just go buy a burrito and a share of Chipotle and let Brian Niccol and company take care of the rest.
Watch Real Money's Real Talk: Debating the Death of FAANG, Thursday, July 22, 2021 at 11:30 am E.T.
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