J.P. Morgan Upgrades The Cheesecake Factory To Neutral

Following the release of 3Q results last night, J.P. Morgan is upgrading shares of The Cheesecake Factory, Inc.

from Underweight to Neutral as it believes absolute downside is unlikely in the shares. “Comps have continued to firm, above industry trend, and we believe both 4Q guidance of 1.5-3% and 2011 guidance of 1-3% are properly, if not conservatively, set,” J.P. Morgan writes. “The brand is currently running 1.3% of menu pricing, and recent discussion of 2.8% traffic trends in 3Q10 suggest negative menu mix.” J.P. Morgan says that it believes the concept's AAA locations and generally higher income consumer allows continued pricing power, and economic improvement should allow less consumer focus on lower price point items and/or ticket management. The Cheesecake Factory currently trades for $27.07.