Now's A Good Time To Reserve A Spot In Zoe's Kitchen

Buckingham Research Group likes Zoe's Kitchen Inc (NYSE: ZOES) shares, although the firm slashed the target price from $37 to $33. Still, the revised price target offers a potential upside reward of more than 50 percent. Therefore, this may be a golden opportunity to buy the shares ahead of the third-quarter results announcement on November 14.

The brokerage listed the following key factors to support its investment thesis:

• The company's strength to boost its store base from 200 to more than 1,000 locations.
• Strong unit economics point out 16 percent catering penetration.
• Differentiated Mediterranean menu apart from offerings like fast-casual format and healthy-for-you.
• Strength to achieve leverage on operating expenses in the coming years.

Related Link: Meet The Detroit Startup Bringing You A Fine Dining Experience On Your Lunch Break

On the third quarter expectations, analyst John Zolidis said, "We are sticking with a 2 percent SRS increase and EPS of $0.05. ZOES earned $0.05 on a 4.5 percent SRS increase LY. The modest sales and earnings increase reflect the soft consumer environment together with pressure on restaurant level margins due to higher labor. The Street is at $0.04 and SRS of 2.7 percent. The company has not provided specific guidance for the quarter."

However, the brokerage trimmed its EPS estimates for the fiscal year 2016 from $0.13 to $0.12 and for 2017 from $0.17 to $0.15. The firm introduced EPS estimate of $0.26 for the year 2018. While stating that the outlook included yearly comps growth of 3–4 percent, the firm indicted that the outlook reflected slight margin contraction of EBITDA. The analyst has a Buy rating on the stock.

At last check, the stock traded at $21.94, down 1.88 percent.

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