Market Overview

Maxim Has An Appetite For Potbelly

Maxim Has An Appetite For Potbelly

The bullish case for restaurant chain Potbelly Corp (NASDAQ: PBPB) can now be made for five distinct reasons, according to Maxim Group.

The Analyst

Maxim's Stephen Anderson upgraded Potbelly from Hold to Buy with a price target lifted from $13 to $15.

The Thesis

Maxim's neutral stance on Potbelly, a neighborhood sandwich concept, dates back to July 2017 but there are now reasons to be buyers of the stock.

  1. Early results of new menu bundling are showing positive signs based on the analyst's checks and a potential nationwide rollout could result in a three- to four-cent EPS boost or as much as 100 basis points to same-restaurant sales.
  2. Taylor Gourmet announced the closure of all 19 units in cities where it closely competes with Potbelly, which implies the potential for a modest traffic boost at Potbelly stores.
  3. A more aggressive franchising program is expected for 2019 and potential proceeds from refranchising could be used to speed up Potbelly's share repurchase program.
  4. Food costs should ease at least through the first half of 2019 and every 10 basis point improvement in prices will generate one cent of EPS upside on an annualized basis.
  5. After falling 15 percent since peaking in August, shares of Potbelly are trading at 23.7 times 2019 estimated EPS and 20.1 times 2020 EPS. The pullback has brought the stock's valuation to an attractive level that should be taken advantage of.

Price Action

Shares of Potbelly traded around $12.21 at time of publication.

Related Links:

Maxim: Habit Restaurants No Longer A Buy, Consider Del Taco Instead

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

Latest Ratings for PBPB

Dec 2019PiperJaffrayDowngradesOverweightNeutral
Oct 2018Maxim GroupUpgradesHoldBuy
Sep 2017PiperJaffrayUpgradesNeutralOverweight

View More Analyst Ratings for PBPB
View the Latest Analyst Ratings


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