What We Learned This Week

Even Great Operators Stumble: Chipotle delivered a rare miss this quarter, highlighting potential cracks in the consumer value equation. While earnings came in line, softer-than-expected sales forced the company to revise full-year guidance downward. Management cited particular weakness in May, calling it a low point for consumer sentiment, though sales have since rebounded modestly in July, likely helped by heavier promotions and ad spend.

The most notable pullback came from lower-income consumers, with many opting out of dining altogether, a trend that may be easing but still raises questions about demand stability. It all suggests that Chipotle’s sales base might be more fragile than assumed, especially as price sensitivity grows and the brand edges into more premium territory.

None of this looks out of step with broader consumer trends - not dire, but clearly softer and more selective. It's worth watching whether this is a company-specific blip or part of a larger shift in the fast-casual category. Wall Street reacted quickly, but for longer-term investors, it’s probably best to wait, watch, and let the dust settle. The company still executes well, and one weak quarter doesn’t break the story.

Tesla's Valuation Continues to Defy Logic: Tesla reminded everyone this week why it's such a hard stock to pin down. The company reported a weak Q2, driven by sluggish EV sales that pressured both earnings and margins — and the market responded accordingly, with the stock down over 9% on the day. Fair enough. But the tricky part with Tesla is that it only trades like a car company when results disappoint. The rest of the time, it’s valued like a high-growth tech and AI platform. That disconnect is what makes it so difficult to analyze. Right now, Tesla trades at roughly 160x next year’s earnings compared to GM at under 6x, a spread that’s hard to justify if you think of them as being in the same business.

Historically, Tesla’s premium was explained by outsized growth, but that’s no longer the case as EV demand softens and competition ramps up. So how do you approach the stock? From our view, the only way to own Tesla today is with a long-term lens and a belief that its emerging initiatives (AI, robotics, autonomous tech, energy) eventually take center stage and eclipse the car business entirely. Musk is clearly pushing in that direction. But in the near term, trying to trade it based on traditional fundamentals is a tough game to win.

The GLP-1 Boom isn’t Lifting all Boats: The GLP-1 space continues to evolve quickly, and not always favorably for the early frontrunners. Novo Nordisk, maker of Wegovy and the widely known Ozempic, saw its stock drop more than 20% this week after cutting guidance and announcing a CEO change. That puts the stock down nearly 50% on the year. It’s a surprising turn for the company that essentially defined the space, especially as demand for weight loss drugs remains robust. But momentum may be shifting. Ozempic is still the most recognizable name, but it's not even Novo’s dedicated weight loss product - that’s Wegovy. And on performance and efficacy, Eli Lilly’s Zepbound has started to outpace it, gaining traction in head-to-head studies and consumer adoption.

Adding pressure is the lingering impact of compounded alternatives. Early supply constraints led regulators to allow compounding pharmacies to produce semaglutide alternatives, a stopgap that has lingered even as manufacturing stabilized. The continued presence of these lower-cost versions seems to be eating into Novo's potential upside. If this is a two-horse race, one horse is clearly limping. All eyes now turn to Eli Lilly's upcoming earnings to see if they’re capturing the full benefit of market growth or if cracks are emerging across the board.