Why Piper Jaffray Just Upgraded Panera Bread: Redesign Going Well, Human Capital Gains

In a report published Wednesday, Piper Jaffray analyst Nicole Miller Regan upgraded the rating on Panera Bread Co PNRA from Underweight to Overweight, while raising the price target from $140 to $200. Analyst Nicole Regan said that Panera Bread was "better-positioned to optimize the brand and its balance sheet." Human capital investments are expected to enable the company to "dimensionalize its brand," Regan added. In the report Piper Jaffray noted, "We believe acquired talent balances individual strengths across the platform; covering the bases of fixing operational function to igniting desire for the brand. Continued execution of brand modernization efforts should stabilize top-line and store-level profitability trends over time, which we believe better positions PNRA shares for upside." The company's Panera 2.0 investment strategy was likely to strengthen the company's long-term positioning. However, more stable and sustainable results could be achieved if the company were to adopt "combination tactics surrounding its loyalty program," Regan said. The report added, "… our channel checks suggest stable top-line and store-level profitability trends. For the 2Q15 period, we project a +2.0% comp and $1.58 per share based on a 16.6% store-level margin that is fairly flat sequentially." The EPS estimates for FY15 and FY16 have been raised from $6.11 to $6.20 and from $6.70 to $7.00, respectively.