Analysts explain why Burger King and Mrs Bector’s shares fell with a thud — and what to do now

Analysts explain why Burger King and Mrs Bector’s shares fell with a thud — and what to do now
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  • The shares of Burger King declined nearly 13% from it's all-time high post listing, whereas Mrs Bector’s Food is down over 20% from its post-listing peak.
  • Just as sharp as the early gains were, the fall since has been a shock for many small investors who were lured by the record surge in both the stocks.
  • Business Insider spoke to a few analysts that track these stocks and other consumer staple companies to understand why the stocks have been falling.
Those who didn’t sell Burger King shares after it ran up 3.5 times the IPO (initial public offering) price⁠— double in the case of Mrs Bector’s Food⁠— may be wondering what to do with their stock.

Business Insider asked a couple of analysts questions to the same effect. Analysts say it is better to hold both stocks, which are down over 20% (Burger King) and 23% (Mrs Bector’s Food) from their post-listing peaks. The advice in both cases, from multiple analysts, is not to sell (if you are holding) and not to buy, not yet.

StockPost listing peakCurrent priceFall from peak
Mrs Bector's Food₹624₹47623%
Burger King India₹213₹17020%

What’s wrong with Burger King India? Nothing.

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The IPO was a hit⁠ — subscribed over 157 times ⁠— and the analysts asked clients to subscribe, because the shares at the time of issue were priced “20-30% discount to its peers,” according to an analyst of a top broking firm who didn’t want to be named because of compliance reasons.

But thanks to the euphoria, the stock was valued more than peers like Jubilant Foodworks (which operates chains like Dominos and Dunkin Donuts in India) and Westlife Development (which operates McDonald’s in the west and southern states). “After the rally, Burger King India was trading at a premium to established peers like Jubilant Foodworks and it was clear that level was unsustainable,” he told Business Insider.

Analysts explain why Burger King and Mrs Bector’s shares fell with a thud — and what to do now

Mrs. Bector’s Food has a similar story. The stock of the biscuits maker was available at a 50% discount to its much-larger peer Britannia, and therefore, its IPO was subscribed 198 times, even better than Burger King. But the discount was wiped out when the stock doubled on the listing day. Correction was due, according to Keshav Lahoti from Angel Broking.
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Analysts explain why Burger King and Mrs Bector’s shares fell with a thud — and what to do now

So is the correction done — can we buy the stocks?

According to both the analysts, there is still room for correction and this is not the time for new investors to jump in to buy the stocks. That doesn’t mean the ones holding it should sell now.

“I think there’s still a small correction left, but the sharp correction that has happened is far behind us. I am not expecting more than 10% correction in both the stocks now,” said Lahoti.
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The other analysts reckoned the same thoughts and said “Even at today’s price, the valuation (for Burger King) looks higher to me. And, I won’t be surprised to see the correction from here.”

Lahoti was a lot more bullish on Burger King than the others. “Business is such that if you have more stores, you will get the operative level and make a profit. But, currently, the pandemic has also impacted its business — so for us it is a long term spree, not a short term,” he said. But his advice to new investors is to wait for another 5% to 10% fall in the stock.

SEE ALSO: Tatas got AirAsia stake at a 20% discount while IndiGo and SpiceJet’s value has doubled since pandemic broke out
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