Tariffs and the Restaurant Sector: J.P. Morgan's Hot Picks and Cold Shoulders

Ladies and Gentlemen, buckle up! We're diving headfirst into the sizzling world of restaurant stocks, where tariffs are the new spice in town. J.P. Morgan's analyst John Ivankoe just dropped some serious knowledge at the Las Vegas forum, and you won't believe what he had to say about who's winning and who's losing in this high-stakes game.

First things first, let's talk tariffs. These nasty little taxes on imported goods are wreaking havoc on the restaurant industry, driving up food costs, equipment prices, and supply chain disruptions. But here's the kicker: some restaurants are handling it better than others. So, who's got the recipe for success, and who's serving up a plate of disappointment?



Let's start with the winners. Ivankoe is all over Dutch Bros Inc (NYSE:BROS), Starbucks Corp (NASDAQ:SBUX), and CAVA Group Inc (NYSE:CAVA). These companies are doing "fewer things better" and reinvesting in customer and employee experiences. CAVA, in particular, got an upgrade to Overweight, with significant potential for expansion in the U.S. and a strong pipeline of operational and brand initiatives. BOOM! That's a stock you want to own.

But wait, there's more! Ivankoe also highlighted Yum! Brands Inc (NYSE:YUM), which exceeded expectations thanks to tech-fee recapture. And get this: Taco Bell U.S. is projected to grow to 9,000 units by 2030, and Taco Bell International is expanding to 2,000 units. That's right, folks! Taco Bell is taking over the world, one crunchwrap at a time.

Now, let's talk about the losers. McDonald’s Corp (NYSE:MCD) and Restaurant Brands International Inc (NYSE:QSR) are fairly valued, but slower U.S. data and international growth may present better buying opportunities. And Domino’s Pizza Inc (NASDAQ:DPZ)? It's fairly valued due to high expectations, but the Middle East conflict's impact on sales growth remains uncertain. So, stay away from these stocks until the dust settles.

And what about the rest of the pack? Chipotle Mexican Grill, Inc (NYSE:CMG) and Brinker International Inc (NYSE:EAT) got a Neutral rating due to high valuations and peak comps. But don't count them out just yet! The analyst remains cautiously optimistic and would consider adding on volatility. So, keep an eye on these stocks, folks. They might just surprise you.



But here's the real question: are tariffs really an issue for the restaurant sector? According to Ivankoe, not as much as you might think. While related inflation could impact several daily consumer staple commodities like avocados, seasonal produce, and coffee, the restaurant sector is surprisingly resilient. So, don't let the tariff talk scare you away from these stocks. Just make sure you're picking the right ones.

So, what's the bottom line? The restaurant sector is a hotbed of opportunity, and tariffs are just one of the many challenges these companies face. But with the right strategy and a little bit of luck, you can turn these challenges into profits. So, do your research, stay informed, and get ready to feast on some serious gains. BOO-YAH!