Market Overview

Dunkin Vs. Starbucks: Analyst Picks A Winner In A Socially Distanced World

Dunkin Vs. Starbucks: Analyst Picks A Winner In A Socially Distanced World

The restaurant industry has been hammered by the COVID-19 outbreak in 2020, sending share prices throughout the space tumbling. However, certain restaurants are better-positioned to weather the downturn than others.

On Wednesday, Bank of America analyst Gregory Francfort raised his price target for Dunkin Brands Group Inc (NASDAQ: DNKN) from $60 to $72 and said Dunkin is much better-equipped for a socially distanced world than coffee competitor Starbucks Corporation (NASDAQ: SBUX).

Slam Dunk: Dunkin’s most recent financial update suggested open store same-store sales were down 23% in the second quarter as of May 23, but had improved to just -15% in the week prior to the update.

Fortunately, Francfort said Dunkin’s drive-thru assets help offset the in-store weakness and help insulate Dunkin’s business more than Starbucks.

Bank of America estimates that Dunkin has drive-thrus at 55% of its points of distribution compared to just 34% for Starbucks.

Long-Term Threat: While in-store business may bounce back in time, Francfort is concerned the recent shift toward in-home K-Cup consumption may prove somewhat sticky.

Given the uncertain outlook and the near-term headwinds, Bank of America has a Neutral rating for both Dunkin and Starbucks.

Dunkin’s drive-thru advantage over Starbucks has been reflected in its stock’s outperformance since the March bottom. Dunkin shares have gained more than 66% in that time, more than doubling the 31% gain by Starbucks. Both stocks are still down more than 10% year to date.

Benzinga’s Take: A shift in business from in-store to the drive-thru is not a problem for either company in the long-term. The key metrics investors should be monitoring is a potential permanent shift to K-Cups and any changes in overall market share.

Related Links:

After Starbucks Partnership, Impossible Foods CEO Says Meat Industry Will Be 'Completely Replaced' In 15 Years

KeyBanc Says It's Time To Make The Donuts, Upgrades Dunkin Brands On Valuation, Accelerating Momentum

Photo courtesy of Dunkin.

Latest Ratings for SBUX

Sep 2020JP MorganMaintainsNeutral
Aug 2020StifelUpgradesHoldBuy
Jul 2020CitigroupMaintainsBuy

View More Analyst Ratings for SBUX
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Related Articles (SBUX + DNKN)

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Posted-In: Bank of America Gregory FrancfortAnalyst Color Price Target Restaurants Analyst Ratings Trading Ideas General Best of Benzinga

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