What Do Wall Street Analysts Think Of The Panera Up-For-Sale Report?

Panera Bread CoPNRABloomberg report

Here is a summary of what some of Wall Street's most notable restaurant analysts are saying.

Credit Suisse: JAB Most Likely Acquirer

Jason West of Credit Suisse commented in a research report that JAB Holdings, the parent company of many coffee brands and chains (such as Krispy Kreme, Keurig, Peet's) is the most likely acquirer of Panera. The analyst also named Restaurant Brands International Inc QSR as an unlikely buyer as Panera's business would overlap with Tim Horton's. UBS: 'Understandable' Rationale But Sale Far From Certain

Baird: Downgrading To Neutral

David Tarantino of Baird acknowledged that Panera's highly differentiated brand and prospects for strong earnings growth in the coming years makes it an attractive takeover target. However, the analyst isn't assigning a high probability to a transaction occurring given the stock's elevated multiple, including an NTM P/E of 35.6x.

BMO: 'Somewhat Surprising'

Bernstein: Buyer Unlikely To Be Starbucks, McDonald's

Sara Senatore of Bernstein thinks that McDonald's Corporation MCD and Starbucks Corporation SBUX are unlikely to be buyers of Panera as it would represent a non-core asset. Related Links: Domino's Not Interested In Panera A Notable Restaurant Analyst On The Likelihood Of A Panera Takeover

West also noted five reasons why an acquisition of Panera would make sense regardless of who the buyer would be:

1. Panera boasts an accelerating earnings profile from investments in stores, mobile ordering and loyalty initiatives.
2. Panera has a longer-term growth opportunity from mobile, delivery, catering and consumer products.
3. Physical store counts can continue growing in the United States and start to roll out international.
4. Initiatives are underway which can improve margins and G&A.
5. Potential for upside from tax reform.

West also noted that an acquisition of Panera can come with a price tag in the range of $300 to $310.

Shares remain Outperform rated with a price target boosted from $260 to $300.

Dennis Geiger of UBS stated that the rationale behind a sale of Panera is "understandable," but it is far from certain if any deal would materialize.

According to Geiger, Panera's operational and financial metrics improvements over the past few quarters, which makes the restaurant chain more attractive now than it has been in the past. Also, the acquisition of Panera from a much larger company could yield margin efficiency and cost saving synergies.

However, there are several hurdles towards a deal being consumed including Panera's market cap and asking price. Perhaps more notable, an acquisition by a heavily franchised restaurant chain and a re-franchising of Panera is unlikely to be an accretive transaction at its current valuation.

Shares remain Buy rated with a price target under review (prior $265).

Tarantino also argued that following Monday's surge in Panera's stock, the risk to reward profile is now "more balanced." Despite the stock's move, the analyst remains highly confident in the company's growth outlook, but the reality remains it is now difficult to recommend investors buy the stock at its current level.

Tarantino also emphasized that he would become a buyer again if Panera's stock dips below $260.

Shares of Panera were downgraded from Outperform to Neutral with a price target boosted from $265 to $290.

Andrew Strelzik of BMO Capital Markets argued that the timing of a potential takeover is "somewhat surprising" as it comes at a time when Panera is on the verge of accelerated earnings per share growth.

Nevertheless, Strelzik believes JAB Holdings is the most logical buyer after the company has been active in buying breakfast and coffee brands and the acquisition of the restaurant chain would create an "attractive tiered breakfast offering." But the analyst suggested that Dunkin Brands Group Inc DNKN is a more suitable target for JAB.

Although the analyst isn't fully convinced a deal would occur, he slapped a price tag on a potential deal at $310 to $350 per share.

Shares remain Market Perform rated with a price target raised from $210 to $270.

In fact, McDonald's is in the process of divesting some of its assets and Starbucks' acquisitions from a historical concept has been smaller companies.