Despite an upgrade by Barclays from equal-weight to overweight and price target increase from $165 to $175, Panera Bread PNRA shares are trading lower.
“Brand Investments (i.e., PNRA 2.0) are Large, But Rewards are Likely Larger,” begins analyst Jeffrey Bernstein.
Barclays compares Panera to other high growth fast casual names. Same store sales are up six to seven percent year over year, a trend that is expected to be sustained.
The Panera 2.0 initiative is expected to help the company boost comparable sales. “The rollout of PNRA 2.0 is in the early stages (~30 stores in 3 markets), with technology to lead the industry. And 2.0 will address throughput, allowing PNRA to lead in an ‘ever more digital & omni-channel marketplace.’”
Related: 3 Analysts Chime In On Panera Bread CFO Resignation
Bernstein notes that earnings will be choppy as the company executes its turnaround over the next one to two year. Nonetheless, he expects outperformance “ahead of the rollout.”
“With near-term expectations low, we see limited downside, and a favorable risk-reward,” says Bernstein. The price target increase is based on multiple expansion.
Shares of Panera were last trading at $151.04, down 0.5 percent on the session.
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