Recruiting season has kicked into gear for 1Ys. To the uninitiated, this might elicit feelings of anxiety, TBD. But, to the shrewd investor, recruiting should be synonymous with one thing – money. Wharton’s annual 850-person scramble for 30 jobs from 3 consulting firms radically shifts students’ purchasing habits over a 6-month period. While others are sitting on their student debt to pay for things like term bills and health insurance, make your money work for you by looking into these intriguing local investment opportunities:
BUY: Chestnut Organic Cleaners (COC, +28%)
Students are figuratively busting down the door at Chestnut Organic as they get their business formal wardrobe primed for the next few months. Conveniently located at 21st and Chestnut, this local cleaners is experiencing the biggest boom in revenues from Wharton’s recruiting cycle. The store comes up 3rd on Yelp when you query “Dry Cleaning Philadelphia” and filter for Rittenhouse Square options. Furthermore, an analysis of the reviews and ratings show its strengths are in expedited services and competitive prices, aligning well with the Wharton student demographic.
Management feels confident that they’ve prepared their operations for the expected increase in demand. In their recent earnings call, they forecasted sales would hover around 200x summertime levels and outlined their learnings from previous falls where they had to turn away business due to the high levels of demand. All of this translates to a BUY recommendation.
SELL: Irish Pub (IP, -87%)
Irish Pub lowered its earnings forecast for Q1 and Q2 as the most-popular-dive-among-Wharton-students reported low revenues from 1Ys at the tail end of Q1. Management declined to elaborate on the sales decline, but analysts attribute it to a quicker-than-expected realization that bars exist on other streets than the one connecting campus to Rittenhouse. It’s a tough blow to the pub, especially ahead of the anticipated headwinds they face during the 6-months of recruiting when demand is at an all-time low. Share prices were decimated by the news.
The pub’s Chief Marketing Officer outlined some plans to boost ‘special events’ and local/community outreach, but these markets pale in comparison to the amount Wharton students drink. Management confirmed they would see spikes at the end of Q2 during finals week and once resume drops are completed. Hopefully you’ve already sold your stock in Irish; if not, do so right away. The stock hasn’t bottomed out yet, and darker days are likely ahead for the neighborhood watering hole.
HOLD: Lyft (L, -0.14%)
Using tax receipts as a proxy for market share, Lyft holds nearly a quarter of the Philadelphia ride-sharing market. The dominant player – Uber – holds the majority. The uptick in late nights, early AM interview prep sessions and requirement to be on time unlike before when it was just missing the first part of class, 1Ys are migrating to these services in record numbers and speed. With Uber’s dominant position, surge charges and wait times are increasingly pain points for their customer base, forcing some to look to Lyft for their campus commute needs. Investors should expect a serious uptick in revenues and profits for Q2 as the company is projected to receive a record-number of ride requests and nearly triple their YAGO requests. Additionally, 2Ys have gotten lazier and continue to drive growth in the segment more broadly.
Caveating this otherwise locked-in BUY investment is recent legal news that threatens the service’s ability to operate in the Philadelphia market. Analysts are divided on how they think the legal battles will play out. For now, competitor Uber’s higher-end service (UberBLACK) will continue to be able to operate. Once Lyft is able to again operate legally in Philadelphia, their relative size and flexibility should make them a perfect buy candidate for investors.