Economy Cools on Coal; Saving Chipotle One Burrito at a Time; Morgan Stanley Made a Mistake and Admits It!

Hot or coal?

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Image courtesy of SOMMAI/FreeDigitalPhotos.net

Feel free to play it naughty this year as Santa may not be able to scrounge up some coal to put in your stocking anyway. That’s because Peabody Energy, the largest American coal miner, might just be going bust, joining a slew of other coal companies. The company announced that it will be delaying a $71 million interest payment that’s due this week – and that, my friends, often signals that a company could be on the brink of filing for Chapter 11 bankruptcy protection. Not that this would come as any great surprise since the stock lost over 95% of its value in the last twelve months and today tanked over 40%. Two years ago the company’s stock hit a high of $299.10. Now it’s barely hanging on as it closed at $2.20 today. The fact is that the global economy is slow enough to wreak havoc on major industries, in this case, coal. Only 33% of power came from coal in 2015. The coal industry has had to contend with stricter environmental standards that have put a major crimp in production. With natural gas being used more and more, seeing as how its cheaper and less polluting, several other coal companies have already gone under. And while nobody is crying over less pollution, it does mean that thousands of people will be out of jobs. Tens of thousands. As for Peabody Energy, the company has thirty days to make that $71 million or face default.

Burritos for all….

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Image courtesy of SOMMAI/FreeDigitalPhotos.net

It appears all is not lost at Chipotle as the food joint managed to recoup about 30% of its sales with the help of some free food – burritos, in fact. There is a lot of irony at work here. According to Chipotle CFO Jack Hartung, “Free burritos—turns out it works. It brings people into the restaurants.” It’s a good thing something is bringing folks back into the restaurants after that ugly E.Coli outbreak that sent millions of customers scrambling as far away from the restaurants as possible. As part of the company’s turnaround plan, Chipotle sent out coupons for free burritos to about 7 million customers. Then it decided that maybe sending out 21 million more coupons might not be such a bad idea. It wasn’t since 5.3 million customers already downloaded the first coupon and then, 2.5 million actually walked into a Chipotle, picked up their free burrito and, presumably, purchased a couple of other items off the menu as well. Hey, once you get ’em in the door…In any case, this quarter marked the first time that Chipotle actually forecasted a quarterly loss. Ever. Naturally, the company is still reeling from the losses over the outbreak. However, it’s also expecting to incur some heavy expenses for marketing and, of course, free burritos.

Um, about that price target…

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Image courtesy of SOMMAI/FreeDigitalPhotos.net

Wall Street insiders made a mistake and they are actually admitting it. Analysts at Morgan Stanley used to just love LinkedIn and thought the world of the platform. But that love has waned and thus the brokerage has downgraded the stock, savagely slashing the price target from $190 to $125. After all, LinkedIn’s earnings didn’t impress. Far from it, in fact, and the stock has gone down a whopping 54% in just the last three months. Morgan Stanley analyst Brian Nowak eloquently said of LinkedIn, “With its current product offering, LinkedIn isn’t likely to be as big of a platform as we previously thought.” That was harsh, I tell you. And just like that, shares of the company went down on all because the brokerages had a fiscal change of heart.

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