Published On: Fri, Aug 15th, 2014

Analyst Herb Greenberg Says Restaurant IPOs Give Investors Indigestion


Herb Greenberg illustration 640x360 +logo analyst Herb Geenberg said that the plethora of restaurant IPOs are giving investors indigestion. What is to blame are hyped-up themes that might generate sales in the short-term, but he reminds viewers that once these companies come public, they have to satisfy the appetites of Wall Street analysts, not just their customers. Noodles (NDLS) may be a popular concept, but its stock was hammered, down 17.73%, after an unsuccessful quarter. While some recent restaurant IPOs have been doing alright, including Potbelly’s (PBPB), up 0.37%, and Papa Murphy (FRSH) up 0.33% on Thursday, Greenberg would be cautious, particularly concerning Potbelly, because the sandwich market is already saturated. El Pollo Loco (LOCO) got off to a fantastic start with its IPO, but it seems to have lost its momentum after its initial shot, and was down 3.37% on Thursday.

However, El Pollo Loco has the advantage of having a highly popular health and Mexican theme. While Zoe’s Kitchen (ZOE) has also been seeing growth, Greenberg is concerned that the Mediterranean theme might not be as catchy as the hot Latin American concept, evidenced in the success of best-of-breed Chipotle Mexican Grill (CMG).

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