Wall Street Daily  - WEYL Shorts Panic May Drive This Stock Much  Higher

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Short Sale Trader Says DNKN Is Done - Upside Growth Limited - Franchise Owners Squeezed

Chanos Says Short Dunkin Brands   -  Is Starbucks Next Short

 

This stock is struggling to stay afloat after better than expected Q2 results . Since March this stock is up 20% and has flatten out dispite Q2 results, usually meaning a toppy chart formation .

Jim Chanos is short DNKN based on his premise that the company sells franchises and collects franchise fees rather than manage its assets

More specifically, DNKN is growing its revenue but at the expense of margins and its profits are "imploding" from multiple factors which only affect franchise owners, including rising labor costs and higher commodity costs.

These shares are overvalued and could see a 20% drop .

10 Day Chart





Summary

Shares of Dunkin' Brands (NASDAQ:DNKN) has topped after Jim Chanos  reveals to CNBC that he has been short the restaurant stock for about a year. Chanos railed against the Asset light model in the restaurant sector and high valuations.

Dunkin' Brands reported solid Q2 results, beating estimates on both their top and bottom line - despite this, upside isn't as compelling as before.

Revenue outlook seems stable, with DNKN expanding intogrowing regions, and coffee demand keeping steady; potential in Baskin-Robbin's pivot.

Costs remain steady, with management keeping OpEx at bay; commodity prices may pressure margins in the future, should coffee prices rise.

Recent run in price has caused valuations to get too high for our taste - limited upside makes an investment much less compelling.

Lower to Hold, $68 PT.

Dunkin' Brands (DNKN) recently reported earnings a few weeks ago, beating estimates across both the top and bottom line. In addition to launching new menu items, and a sturdy demand for coffee in the U.S., the company appears to be focusing on key geographies with rapidly growing middle-class populations.

Source: QSR Magazine

Results were good, although some areas - such as the Baskin-Robbins segment - are lagging, and at today's valuation the bull case is just less compelling than before. As a result, we would take some money off the table as shareholders, and wait for a pullback in valuation before buying anymore shares if a prospective shareholder.

Revenue Outlook

Dunkin' reported Q2 sales of $351 million, which topped the analyst consensus of $342 million - a 2.6% beat, and up 4.9% from the same quarter last year. Same-store sales in the U.S. grew by 1.4% year-over-year (y/y), although the company's Baskin-Robbins business only squeezed out SSS growth of 40 basis points since the same quarter last year.