Breaking News
Ad-Free Version. Upgrade your experience. Save up to 40% More details

Here's Where Red Robin Stock Becomes A Bargain Entry

By (Jea Yu )Stock MarketsSep 02, 2020 07:17AM ET
Here's Where Red Robin Stock Becomes A Bargain Entry
By (Jea Yu )   |  Sep 02, 2020 07:17AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items

Fast casual restaurant chain Red Robin Gourmet Burgers (NASDAQ:RRGB) stock has been dormant during the pandemic recovery even as the benchmark S&P 500 index make new all-time highs. However, shares have finally awoken as money looks for laggard opportunities among the rapidly accelerating burger restaurants.

The recovery narrative coupled with the ever-increasing potential for a COVID-19 vaccine drawing closer, as well as a fear of missing out (FOMO) is bolstering demand for bargain stocks. With the shares still trading (-60%) below its February 2020 pre-COVID highs, prudent investors and nimble traders still take bargain entries on opportunistic pullbacks and trigger levels.

Q2 FY 2020 Earnings Release

On Aug 11, 2020, Red Robin released its second-quarter fiscal 2020 results for the quarter ending June 2020. It reported a non-GAAP earnings-per-share (EPS) loss of (-$3.31) versus consensus analyst estimates for a loss of (-$3.35), a (-$0.04) per share miss. Revenues dropped (-47.7%) year-over-year (YoY) to $161.12 million missing consensus estimates of $166.02 million. Comparable restaurant sales fell -41.4 YoY and comparable guest counts fell -38.5% YoY. Off-premise sales surged 208.7% YoY making up for 63.8% of total food and beverage sales.

COVID-19 Impacts

The financial impacts of COVID-19 was the major disruptive factor in the shortfalls. The Company also temporarily abated franchise royalties effective March 20. It resumed collecting partial royalties and advertising contributions in the latter part of the second quarter and doesn’t plan on collecting abated fees. Due to closed restaurants and 50% capacity restrictions during re-openings, guest count fell -36.2% YoY. On the bright side, the pivot to off-premise sales including carry-out, curbside and delivery grew by 208.7% YoY.

Dining rooms began opening in mid-May 2020 with “increasing sales trajectory” but had to “pivot again” to handle the pandemic resurgence in California with the closing of dining rooms again. Management stated they have regained momentum since the resurgence, with sequential improvement in weekly net sales for the past five weeks. Due to the California dining room closures with a weekly cash burn rate of -$2 million, the Company expects losses in Q3.

Pandemic Measures

Red Robin adopted a smaller menu composed of 1/3rd less items. This has resulted in improved operational efficiencies including faster ticket times and improved quality and consistency. Delivery options were provided directly through Red Robin Delivery services as well as third-party platforms. Red Robin has restructured landlord leases, cut costs and improved efficiencies. The January 2020 refinancing of its $300 million credit facility provides liquidity through early 2025, with a weekly cash burn rate of $1 million per week at partial occupancy rate. As of Aug. 9, the Company has $103 million in liquidity including $26 million cash and available borrowing capacity. Positive cash flow is expect before the end of the year.

Donato Pizza

The Company plans to rollout Donatos Pizza to 31 more restaurants in addition to the 48 Red Robins carrying it pre-pandemic. These restaurants experienced 700-basis point comp sales improvement on average. As more restaurants add their pizza product, sales are expected to accelerate quicker with the improved core staple mix that differentiates itself from other fast casual burger restaurants. Offering burgers and pizza is an unusual but winning combination that differentiates Red Robin from competitors like Shake Shack Inc (NYSE:SHAK), McDonald’s (NYSE:MCD), and Burger King (NYSE:QSR). 

RRGB Monthly Chart
RRGB Monthly Chart

RRGB Opportunistic Pullback Price Levels

Using the rifle charts on the monthly and weekly time frames provides a broader view of the landscape for RRGB stock. The monthly rifle chart has been in a downtrend with key 5-period moving average (MA) resistance at $11.73. The stochastic is attempting to cross back up or rejects off the 5-period MA triggering a mini inverse pup back down. The weekly rifle chart is in a make or break formation with the 5 and 15-period MA bumper levels at $9.66 Fibonacci (fib) level and $10.83, respectively. The weekly rifle chart triggers a market structure low (MSL) buy above the $13.60, while the daily MSL triggered above $8.79. This makes the upside trajectories on a weekly mini pup logical at the $13.60 weekly MSL buy trigger, $14.76 fib, $16.56 and $17.01-$17.50 fib/daily upper Bollinger Bands® (BBs). If the weekly stochastic stalls on pullback then opportunistic pullback price levels are at $10.83 weekly 15-period MA, $9.66 fib/weekly 5-period MA, $8.79 daily MSL trigger and $7.69 fib. Since this is a laggard late mover, it may buy fade against a falling market initially. A monthly 5-period MA rejection is expected on initial tests at $11.73. However, this level can also be a breakout trigger if it holds on pullbacks since the 5-period MA is sloping up indicating rising bid support.

Here's Where Red Robin Stock Becomes A Bargain Entry

Related Articles

Tim Knight
DraftKings In A Very Dangerous Position By Tim Knight - May 07, 2021 3

This is a good real-life example of how charting can be very helpful in giving warnings that something is going wrong. Below is the chart of DraftKings Inc (NASDAQ:DKNG) without...

Here's Where Red Robin Stock Becomes A Bargain Entry

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at’s discretion.

Write your thoughts here
Are you sure you want to delete this chart?
Post also to:
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
Sign up with Email