The Next Tech Rally Comes with Fries
In 2016, a prominent CEO gave a presentation for business leaders titled “How to Transform a Legacy Company into a Technology-Enabled, Nimble, Category-Disrupting Machine”.
Business buzzwords aside, the idea boils down to this: If you want your company to thrive in the modern world, you must embrace technology.
The CEO behind these words isn’t the leader of IBM, Xerox, or another prominent legacy tech firm. This tech disruptor is none other than Patrick Doyle, who took the helm at Domino’s Pizza (NYSE:DPZ) way back in 2010.
Harvard Business Review noted that under Doyle’s command, half of Domino’s staff at its headquarters worked in software and analytics. “All that technology has changed how customers order (using the Domino’s app, or directly via twitter, or even by texting an emoji); how they monitor the status of their order; and how Domino’s manages its operations.”
We’ve followed Domino’s remarkable turnaround closely over the years. Sure, we found some of its tech-inspired promotions — like the pizza emoji ordering — a bit ridiculous. But the numbers don’t lie. With Doyle at the helm. Domino’s stock has returned a remarkable 1,700% since 2010.
We’ve successfully traded Domino’s stock over the past few years here at Rude HQ — and we’ve also closely followed its transformation into a tech-focused company. Domino’s made ordering pizza dead simple for anyone with a computer, tablet, or smart phone. Anyone with a busy schedule, hungry kids, or no patience could get a pizza sent their way at the push of a button. No one else in the biz could claim this level of convenience.
And it worked! It only took five years for Dominos to generate 50% of its sales from digital sources. As of 2016, Domino’s was racking up $2 billion from e-commerce sales. That’s more than half its revenue.
Now, another fast food giant is following a similar plan to win back customers and return to its former glory.
I’m talking about McDonald’s (NYSE:MCD).
Just a couple of years ago, McDonald’s was floundering. Like Domino’s, customers weren’t thrilled with food quality or offerings. And the stock was suffering. Also like Dominos, McDonald’s new CEO addressed these issues with a revamped menu and a successful push to introduce all-day breakfast.
Now the McDonald’s tech revolution can begin:
“McDonald’s is now turning to delivery services and digital-ordering options to attract more diners,” Bloomberg reported in late 2017. “The company delivers food from 3,700 U.S. restaurants through Uber Technologies Inc.’s UberEats, and it’s on track to expand the service to 5,000 locations by the end of the year.”
The result? Growth.
McDonald’s beat Wall Street’s first-quarter expectations on the top and bottom line yesterday. The fast-food chain even posted its 11th consecutive quarter of same-store sales growth, MarketWatch reports. After years of dwindling foot traffic, McDonalds is winning back customers in a big way. The stock rallied more than 5% yesterday, erasing a big chunk of its February decline.
While investors continue to sell tech stocks in this difficult, range-bound market, traders have a chance to hop on this “stealth” tech turnaround as it makes a run back toward its all-time highs.