Market Overview

Analysts Initiate Optimistic Coverage On Zoe's Kitchen As Quiet Period Ends

Zoe's Kitchen (NYSE: ZOES) saw its analyst quiet period end. Analysts were eager to initiate coverage on the restaurant serving Mediterranean-inspired dishes.

Analysts Initiate Coverage

Stifel analyst Christopher Innes picked Zoe's Kitchen as the top stock-appreciation pick on Tuesday, initiated coverage with a Buy rating and $42.00 price target. Innes emphasized the company's “unique combination of concept elements that will enable the concept to become the next big idea in the white-spaced Mediterranean category that, in our opinion, provides the brand with Chipotle-like structural competitive advantages within the industry's highest ROIC segment (Convenient-Casual).”

Nicole Regan from Piper Jaffray initiated coverage on Zoe's shares with an Overweight rating and $32.00 price target. Regan highlighted the company's “culture of operational excellence” and sees Zoe's +30 percent growth in 2011 and 2012 “validates Zoes Kitchen reputation as a unit growth restaurant story.”

Robert W. Baird & Co. analyst David Tarantino is also optimistic on the company's brand and sees Zoe's Kitchen on track for solid near-term and long-term growth. The analyst wrote, “We believe ZOES possesses a differentiated brand that is capable of producing very scarce levels of revenue and earnings growth for an extended period. In our opinion, the sizable valuation premium for the stock can be justified by a relatively open-ended unit growth opportunity (supported by healthy ROICs) as well as potential for strong operating momentum to lead to an upward bias to near-term estimates and substantial long-term earnings power.”

Baird initiated coverage with an Outperform rating and $35.00 price target.

Jefferies analyst Andy Barish is a bit more conservative in his rating. Barish initiated coverage with a Hold rating and a $25.00 price target. The analyst expects Zoe's Kitchen to consistently yield +20 percent EBITDA growth “as it moves toward becoming a national lifestyle and restaurant brand in the fast- casual segment.”

With the company having less than 125 restaurants today, Jefferies prefers “to let the company grow into its valuation for some time.”

The third joint book-running manager, William Blair, initiated coverage on Zoe's Kitchen with an Outperform rating.

Shares of Zoe's Kitchen closed at $28.99 on Monday. The stock is currently down 1.69 percent at $28.50.

Posted-In: Andy Barish Christopher Innes David Tarantino JefferiesAnalyst Color Price Target Initiation Analyst Ratings

 

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