Hello,

Charles Here.

When a new company hits the scene, its rise can seem unstoppable.

But at some point, expectations can reach a point that are impossible to meet.

At that point, what matters is how a company responds.

There is a right (and wrong) way to recalibrate expectations. And Andrew Giovinazzi is no stranger to that.

Below, he’s going to show you one company that dealt with missed expectations in a proficient way. And he’ll show you a different company that continues to struggle.

Let’s see what Andrew has to say…

The stock I hate is slightly contrary to my Make America Healthy Again theme, Chipotle Group (CMG).

An analyst famously went to 70 Chipotles and found the quantity of food between locations differed a lot. That, and the massive food price increases, pushed people away. 

Right now, Chipotle just priced itself out of the market.

After the furious drop on missed earnings, Chipotle will likely give up its large multiple as do all stocks that miss earnings. Chipotle is down 50% this year and option prices are still high, reflecting more of a move which looks down. Chipotle can see the 20s.

This is a similar issue to Cracker Barrel Inc (CRBL). The company gets too big and the quality that got them to the top suffers. Cracker Barrel is still in freefall one month after its terrible earnings report.

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This is the buy of the month

When folks think of Meta Inc. (META) they think of Zuckerberg the CEO and all of the shenanigans during COVID when Facebook decided to “hide” certain information from the public. 

One thing Zuck does is about face and a Mea Culpa faster than any CEO around. He made the jump to phones just after the IPO. And when the Metaverse sputtered, he retooled. I expect the same to happen here after this earnings report where Meta still put up huge revenue.

I believe that AI will only enhance the value of social networks. Maybe that is a reason Elon Musk bought Twitter (besides the free speech aspect).

I like the idea of buying META below $600 so I sold a 600/550 put spread this week. I will likely buy some shares too if it falls below $650. Every time one of these big tech titans gets the lowest multiple, it is a buy. The META news borrowing 20 Billion dollars for chips is kinda funny. It has 40 billion cash and generates 100 billion a year in profits.

This is a great opportunity to buy a very agile company.

To your investing success,

AG

Missing expectations can haunt a company for a long time. But when you stay transparent, admit you messed up, and recalibrate… investors just might forgive you.

If you struggle to find a path forward, well, there’s no telling how far shares might fall.

So what do you think…

Will Mark pick Andrew’s picks on Monday’s Ticker Highlight show? 

You saw Licia’s pick yesterday. You’ll see what Hans is thinking next..

And Sunday, Mark will tell you his choice.

The big decision happens on Monday at 10:00 a.m. 

Click here to get a reminder Monday morning with the State of the Market Newsletter.

Take care,

Charles Delvalle

Managing Editor