Cowen: Jack In The Box Brings The Heat With Tiny Tacos, Spices Up 2020 Guidance

First-hand checks at Jack in the Box Inc. JACK stores suggest the recent launch of Tiny Tacos is a game-changer and puts the restaurant chain on track to achieve 2020 guidance, according to Cowen.

The Analyst

Andrew Charles upgraded Jack in the Box from Market Perform to Outperform with a price target lifted from $91 to $102.

The Thesis

Jack in the Box launched in mid-January Tiny Tacos and Cowen's first-hand checks throughout the first three weeks point to a sales lift of at least 5% and up to a low-double-digit, Charles wrote in the note. The momentum could translate to a full-year 2020 same-store sales growth of 1.5% to 2.1% which puts it within reach of management's own guidance of 1.5% to 3% and the Street's current estimate of 2%.

The restaurant chain has developed a reputation for lowering its initial same-store sales guidance each year since 2015, the analyst wrote. As such, management now has an opportunity to reverse this trend and it would "go a long way" to support the stock which is down 16% over the past three years.

Beyond the Tiny Tacos initiative, investors have reason to be concerned with Jack in the Box's longer-term story, the analyst wrote. But the company's late-2019 announcement it is searching for a new CEO is a positive development. A new CEO backed by prior experience in turning around a restaurant could mark a shift from the prior "bundled value" strategy.

Price Action

Shares of Jack in the Box were trading higher by 1.39% at $87.52 at time of publication.

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