DMP downgrading, with the “accordingly, 2H has not improved on [pcp]”…

…but the market was there already given the string of downgrades. Below is the Bloomberg earnings outlook, where it would seem that 2H23 is already very slightly below both the previous half, and the prior corresponding period.

So now, you’ve got to decide if a) “ahah, this is the decisive action I was looking for, in recognition of a few underperforming stores/regions, and those sensible cost out initatives indicates a rightening of the ship, ergo it is off to the races as this former growth-manager market darling is back on track”…

or b) if you are witnessing narrative creep e.g. a thesis going from “difficult cycle, cycling strong comps, perhaps a mistimed/mis-calibrated price hike whilst consumers were expecting us to remain value concious” to “we have some serious performance issues across our network”….

Now, paying c30x for a turnaround in competitive QSR (quick service restaurants) is pretty aggressive, in general.

Pretending, for the sake of example, paying 30x for XRO as a moat-y/SASS-y “turnaround” or 30x for TPG as a non-discretionary open borders/rational-pricing “turnaround”, seems more understandable…

It will be interesting to see how it trades, today. How much is priced in? At this stage, I am not sure. That balance sheet could not withstand another downgrade, so there is smoke, if not fire.

Difficult to see, the future is.

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