Baird downgrades Darden Restaurants stock but raises price target

Yahoo Finance Live anchors discuss Baird’s Neutral rating on Darden Restaurants.

Video Transcript

[AUDIO LOGO]

BRAD SMITH: Let's also take a look at shares of Darden Restaurants, ticker symbol DRI, this morning following a downgrade to neutral by Baird, citing that the risk and reward looks more balanced. Baird did, however, raise its price target on Darden to $150. That's up from $134, as they believe that DRI is on track to deliver good results in the second and third quarters here.

Now, some of the backdrop here is pretty interesting, and I was taking a look at some of the stats from the National Restaurant Association. And even though you saw eating and drinking places for the most recent month where we saw data come in, post total sales of $89 and 1/2 billion, which was up 1.6% sequentially, you still have total dollar spending in restaurants increasing in recent months.

However, that's due to rising menu prices. It's not just because people are going into these experiences saying, yeah, we want to spend more at, you know, Red Lobster, or I want to get endless salad and breadsticks at Olive Garden. The prices are just higher.

BRIAN SOZZI: They are just higher. And I am on-- I was looking at the menu by me for Olive Garden. Spaghetti with meatballs, almost 1,000 calories, $16.78. So two of those, $40 after tax, you're now looking at almost, what, a $60 night out with no drinks.

BRAD SMITH: At the Olive Garden.

BRIAN SOZZI: At the Olive Garden. And that is a big, I think, just shift. I mean, we remember going to Olive Garden back in high school. This place was dirt cheap. Grab your salad. Grab your food. $15, you're out the door. But, I mean, it's changed because of inflation. It's a total different model.

JULIE HYMAN: Yeah.

BRIAN SOZZI: You like Olive Garden?

JULIE HYMAN: What?

BRIAN SOZZI: You're not an Olive Garden fan?

JULIE HYMAN: I mean, I haven't been to an Olive Garden in 25 years.

BRIAN SOZZI: Hmm, interesting.

BRAD SMITH: Tour of Italy, that is the closest thing--

JULIE HYMAN: I liked it when I was in college. There you go.

BRIAN SOZZI: It was good. Well, they will report earnings next week.

BRAD SMITH: That is true, yes.

BRIAN SOZZI: So I'm very curious on how those same source sales play out.

BRAD SMITH: All right, we're going to see.