Stifel Expects A Recession Within 3 To 9 Months; Bearish On Restaurants
Stifel analyst Paul Westra expects the U.S. economy to fall into a recession within the next three to nine months. In a series of new notes out on Tuesday, he explains why the U.S. economic downturn will be bad news for restaurant stocks.
Westra turned bearish on restaurant stocks for three reasons:
- Stifel sees Q2 comp deceleration across every industry sector.
- Historically, restaurants have endured at least two years of negative Relative Pricing Power at the beginning of cyclical downturns.
- In the year prior to the last three U.S. recessions, restaurant stocks have declined an average of 23 percent.
“Restaurant stocks are monolithic as ~75 percent of names tend to outperform/underperform together throughout a business cycle – such that getting the ‘sector call’ correct represents the vast majority of the potential alpha creation,” Westra explained.
A Few Names
Stifel downgraded several restaurant stocks:
- Panera Bread Co (NASDAQ: PNRA): Sell, $175 price target
- BJ’s Restaurants, Inc. (NASDAQ: BJRI): Sell, $35 price target
- Cheesecake Factory Inc (NASDAQ: CAKE): Sell, $43 price target
- Chuy’s Holdings Inc (NASDAQ: CHUY): Hold
- Chipotle Mexican Grill, Inc. (NYSE: CMG): Sell, $215 price target
- Del Frisco’s Restaurant Group Inc (NYSE: DFRG): Hold
- Darden Restaurants, Inc. (NYSE: DRI): Sell, $53 price target
- El Pollo LoCo Holdings Inc (NASDAQ: LOCO): Hold
- Dave & Buster’s Entertainment, Inc. (NASDAQ: PLAY): Hold
- Texas Roadhouse Inc (NASDAQ: TXRH): Hold
- Zoe’s Kitchen Inc (NYSE: ZOES): Hold
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Disclosure: the author holds no position in the stocks mentioned.
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|Oct 2016||Morgan Stanley||Maintains||Equal-Weight|
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