Market Overview

Stifel Expects A Recession Within 3 To 9 Months; Bearish On Restaurants

Stifel Expects A Recession Within 3 To 9 Months; Bearish On Restaurants
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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:

  1. Stifel sees Q2 comp deceleration across every industry sector.
  2. Historically, restaurants have endured at least two years of negative Relative Pricing Power at the beginning of cyclical downturns.
  3. 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.

Related Link: Has Chipotle Finally Bottomed?

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.

Latest Ratings for BJRI

Oct 2016WedbushMaintainsNeutral
Oct 2016BarclaysMaintainsUnderweight
Oct 2016Morgan StanleyMaintainsEqual-Weight

View More Analyst Ratings for BJRI
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