Goldman Sachs has a good feeling about the dining sector.
“We are optimistic on restaurants’ top-line trajectory through 2H18, and see no historical precedent for a rapid reversal from new all-time highs of discretionary wallet share,” the firm said in a Tuesday note.
Goldman does have more faith in some restaurants than others.
Goldman Sachs analyst Karen Holthouse:
- upgraded Darden Restaurants, Inc. (NYSE: DRI) from Neutral to Buy and raised the price target from $106 to $130;
- upgraded Bloomin’ Brands Inc (NASDAQ: BLMN) from Sell to Neutral and maintained an $18 target; and
- downgraded Wingstop Inc (NASDAQ: WING) from Buy to Neutral but raised their target from $58 to $66.
Goldman sees risks in labor and delivery costs, quarter-over-quarter “choppiness” and investor awareness that fast food faces a high first-quarter comparable, Holthouse said in a Tuesday note. (See her track record here.)
At the same time, near-peak valuations relative to other discretionary sectors suggest market optimism may already be baked in.
The latter factor merits a sell of Wingstop shares, the analyst said. Goldman Sachs, although generally bullish on comp and unit growth fundamentals, considers the metrics already well-reflected in Wingstop shares.
Bloomin’ Brands’ relatively low valuation appears to account for the analyst's sub-consensus outlook.
“Our survey data suggest some reasons for comp optimism,” Holthouse said in the upgrade note.
Darden appears most palatable, with upside potential for Olive Garden and LongHorn Steakhouse comps, she said.
“We believe off-premise can continue to act as a 1-percent-plus comp tailwind in F19 and note positive recent data points in search trends."
Darden shares were up 0.59 percent at $119.38 at the close Tuesday, while Bloomin’ Brands was down 2.2 percent at $18.71 and and Wingstop was down 1.91 percent at $66.19.
Applebee's Parent Dine Brands Downgraded By Raymond James After 30% Rally
Texas Roadhouse's Valuation, In-Line Growth Prospects Prompt Wedbush Downgrade
Latest Ratings for BLMN
|Sep 2018||Goldman Sachs||Upgrades||Sell||Neutral|
|Jul 2018||Bank of America||Maintains||Neutral||Neutral|
|Jul 2018||Wells Fargo||Maintains||Market Perform||Market Perform|
View More Analyst Ratings for BLMN
View the Latest Analyst Ratings
See more from Benzinga
- KeyBanc Flips To The Roku Channel For A Happy Narrative
- Tesla 'Is Arguably Just Getting Started,' But Needs Better Leadership, Nomura Says In Downgrade
- A Double Pair Trade: Morgan Stanley Buys 2 Biotechs, Sells 2 Others
© 2018 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.