Cowen's Andrew M. Charles upgraded the rating on Habit Restaurants Inc HABT from Market Perform to Outperform, while raising the price target from $28 to $30.
"An 11 percent YTD pullback in HABT shares on fears of the impact to sales from a promotional QSR environment and a potential secondary offering provide an attractive entry point into what we view as one of the best and largest unit growth stories in the restaurant industry," Charles pointed out.
The analyst believes that despite year-to-date underperformance, the fundamentals remain intact and appealing. The company offers the highest unit growth opportunity, compared to its publicly traded fast casual peers.
Charles also believes that Habit Restaurants has a long runway for unit growth, with ultimate potential for more than 2,000 stores from the current 142, supported by its targets for robust 30 percent new unit returns.
"We expect the beat & raise approach to guidance in 2015 will extend to 2016, as we expect HABT will continue to exceed LT comp targets of 2–4 percent, with the most tangible drivers in 2016 including continued menu innovation through premium priced LTO's," the Cowen report said.
In addition, the analyst believes that investor concerns regarding the impact of increased discounting environment for quick service hamburgers on the company's sales in early 2016 have been overblown.
In fact, Cowen's proprietary survey data suggests that 25–30 percent of fast casual visits are driven by this category.
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