A Dunkin' By Any Other Name: Maxim Raises Stock's Price Target

Dunkin Brands Group Inc DNKN is removing the "Donuts" portion of its iconic name in a move that's consistent with the company's focus on beverages, according to Maxim.

The Analyst

Maxim Group's Stephen Anderson maintains a Buy rating on Dunkin' Brands with a price target lifted from $77 to $83.

The Thesis

Dunkin' Brand's decision to remove the "Donuts" portion of the restaurant chain is logical as more than 60 percent of Dunkin' U.S. sales come from beverages, Anderson said in a note. The decision also comes at a time when management is heavily marketing the coffee chain as an "on-the-go beverage brand" so the name change is "overdue."

Recent M&A activity in the restaurant sector supports a valuation multiple near the high-end of recent rages, the analyst said. The company boasts an asset-light model and a sustainable growth story with top-line drivers and backed by a strong free cash flow generation profile. If an acquisition were to occur at similar multiples seen in the restaurant industry, a buyout of Dunkin' Brands could come with an $85 per share price tag.

While there's no reason to believe a firm acquisition offer of Dunkin' Brands is on the table, the case for owning the stock can still be made based on the "most important near-term sales opportunity," according to the analyst. Specifically, an increased adoption of mobile ordering in the next two years could account for 100 basis points to same-restaurant sales.

Price Action

Shares of Dunkin Brands were trading marginally higher around $74.29 Wednesday.

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