Shares of one of the largest stadium and campus food vending companies continued to plummet on Tuesday despite assurances it can weather the coronavirus shutdown that's closed off many venues where it would normally sell food.
Aramark (NYSE: ARMK) shares are off more than 50% since the stock's January high.
Aramark has food-service contracts at eight arenas that are home to NBA and NHL teams. Both leagues are shut down by the pandemic. The Philadelphia-based company also is the food vendor at nine Major League Baseball stadiums, and MLB's season is also on hold. The company also manages food services at several college dining facilities, and many of those are also shutting down to try to slow the spread of the virus.
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Analysts Find Upside
Stifel analysts said Tuesday after talking with Aramark management that the company has more flexibility in its debt structure than initially feared and the firm is "incrementally less concerned about the debt covenants in the near-term."
Stifel has a Buy rating on Aramark with a $49 price target.
A Friday note from Baird analyst Andrew Wittmann had suggested Aramark could see a 20% revenue hit to its food service business in the June quarter, though he noted that many of the contracts insulate Aramark somewhat by putting profit and loss risk on the client. Wittmann has a Hold rating and $25 price target on the stock.
Payroll Costs Drop
Aramark has also sought to reassure investors that closing operations in dark stadiums or college campuses isn't a disaster because it doesn't have fixed operating costs during shutdowns.
“Our employees, if the operations are closed, typically are not paid,” Aramark’s chief executive John Zillmer told investors last week, according to the Philadelphia Inquirer.
Investors didn't appeared to be reassured. At publication time Tuesday, shares were down more than 12.3% to $15.17, after trading above $46 in late January.
Sysco Corporation (NYSE: SYY), which competes in the same space as Aramark, was down more than 5% Tuesday afternoon.