Stephens On Cheesecake Factory: No Catalyst Or Recovery In Sight

Cheesecake Factory Inc CAKE has no catalyst or recovery ahead given its overexposure to malls, according to Stephens.

The Cheesecake Factory Analyst

James Rutherford resumes coverage of Cheesecake Factory's stock with an Underweight rating and $14 price target.

The Cheesecake Factory Thesis

Among the 206 Cheesecake Factory locations across the U.S., 65% are located in traditional regional or super-regional malls, Rutherford wrote in the note. Unfortunately, many of these malls are likely to suffer declining foot traffic as major department stores and movie theatres face "an existential crisis."

The restaurant chain's struggles didn't start with the COVID-19 pandemic as the past five years have been challenging. Most notably, the company has failed to show a single quarter of positive traffic dating back to early 2015.

Cheesecake Factory ended April with $260 million of cash while many locations were operating at break-even cash flow levels from off-premise orders at around $4 million. Even if the company catches up on missed rent payments, it has enough liquidity for "well over a year" at current levels.

However, Rutherford said the next few years are likely to be "much worse" than the past five years as the long-term fate of the chain is "inseparable from the regional mall."

CAKE Price Action

Shares of Cheesecake Factory were trading lower by 7% at $17.98.

Related Links:

The Story Behind The Ticker: The Cheesecake Factory

April's Restaurant Data Far From Encouraging, But There Is Hope

Posted In: CoronavirusJames RutherfordmallsStephensAnalyst ColorPrice TargetInitiationRestaurantsAnalyst RatingsGeneral

Ad Disclosure: The rate information is obtained by Bankrate from the listed institutions. Bankrate cannot guaranty the accuracy or availability of any rates shown above. Institutions may have different rates on their own websites than those posted on Bankrate.com. The listings that appear on this page are from companies from which this website receives compensation, which may impact how, where, and in what order products appear. This table does not include all companies or all available products.

All rates are subject to change without notice and may vary depending on location. These quotes are from banks, thrifts, and credit unions, some of whom have paid for a link to their own Web site where you can find additional information. Those with a paid link are our Advertisers. Those without a paid link are listings we obtain to improve the consumer shopping experience and are not Advertisers. To receive the Bankrate.com rate from an Advertiser, please identify yourself as a Bankrate customer. Bank and thrift deposits are insured by the Federal Deposit Insurance Corp. Credit union deposits are insured by the National Credit Union Administration.

Consumer Satisfaction: Bankrate attempts to verify the accuracy and availability of its Advertisers' terms through its quality assurance process and requires Advertisers to agree to our Terms and Conditions and to adhere to our Quality Control Program. If you believe that you have received an inaccurate quote or are otherwise not satisfied with the services provided to you by the institution you choose, please click here.

Rate collection and criteria: Click here for more information on rate collection and criteria.