Panera Bread (PNRA) traded at an all-time high Thursday after word that Goldman Sachs raised its price target and said investors should be buying shares of the sandwich and soup seller.
The firm put Panera, one of the so-called fast-casual restaurants that are generally more expensive than fast-food chains like McDonald's (MCD) or Burger King (BKW), on its conviction buy list, saying it warrants a $215 price target. That's $30 ahead of its prior target and nearly 27% above Wednesday's finish.
Recently, Panera was up $6.23, or 3.7%, to $175.73. Earlier in the session, it reached $176.67, a record intraday level. The best close ever recorded was $173.10 last October.
Panera has paid off in terms of appreciation for its long-term holders. In the last half-decade, the stock has surged more than 300%, averaging about 35% annually, FactSet data show. Even so, Panera has flattened out in the previous 12 months, advancing only 6%. Thus far in 2013, through the most recent close, it's added 4.5%, according to Yahoo Finance figures.
Two charts tell an interesting story about the stock. The first one takes a long-term view of Panera's change over time. The surge of the past five or so years stands out:
Second comes a visual to perhaps put that in perspective. This chart compares the stock with a company that does something entirely different, but that has been another fast climber (until recently) going back to 2008. That would be Apple (AAPL):
What does it mean? Maybe nothing, though it is a noteworthy track they followed for much of the period, in particular since Panera has been a formidable competitor. And it could be argued, without too much of a leap, that the average Panera customer and the typical Apple shopper would have at least a little in common, both philosophically and income-wise.
But back to the day's news on Panera, which was giving the stock its latest lift. Based on FactSet data, Goldman's target appears to be the highest on Wall Street. Longbow Research would be second, at $207, and the average price goal analysts have is $190.29.
The newest research call continues an active week for Panera's observers. Raymond James upgraded the stock to market perform from underperform, while Oppenheimer boosted its price estimate by $10 to $200. Addressing the Goldman move, Barron's pointed out that the firm says Panera "has a strong unit growth trajectory, same-store sales are solidly in the mid-single digits, margins are ramping, and [free cash flow] deployment is increasingly robust."
Sales in total have a compound annual growth rate of 14.8% and nearly doubled from 2007 to 2012. Net income for Panera has a CAGR of 24.7%. From 1,325 stores in fiscal 2008, analysts are expecting 1,898 locations by the end of 2014, which, if it happens, would represent growth of 43%.
Whether Panera can keep all this up of course depends a great deal on customers continuing to pay a premium for the type of food it offers, along with its ability to manage commodity prices, in particular if it wants to pass on higher input costs at the register. Working in its favor, however, is the idea that American diners are become more cognizant of the food they purchase, making them increasingly likely to spend more if they believe they're getting greater quality than they would with standard burger chain fare.
Compared with similarly styled restaurants, Panera's profit multiple isn't particularly unusual. It has a forward price-to-earnings ratio of 23.1, whereas Starbucks (SBUX) comes in at 24.1, Chipotle (CMG) at 30 and Einstein Noah (BAGL) at 14. The five-year average of that measure is 22.2, and the peak is 28.6, according to FactSet.
Should the company earn $7.06 a share for 2013, as is expected, the multiple on Goldman's $215 target would be 30.4. At its most expensive point back to 2008, Panera traded at 36.5 times earnings. So viewed only through this particular metric, it is possible investors may be willing to continue paying.
You tell us: Is Panera going to keep climbing, or is it too risky to get in on the stock now?