3 Restaurant Stocks Wall Street Predicts Will Rally by 50% or More

COVID-19 vaccination rates in the United States have risen significantly over the past few weeks as even hesitant people have now begun rushing to receive their vaccines amid the rapid spread of the COVID-19 Delta variant. Daily average doses administered…

 rose 31% in the last week of July to 390,000 per day. Furthermore, the CDC issued recommendations to approve vaccine booster shots for vulnerable people on August 13.

With approximately 70% of the U.S. adult population at least partly inoculated to date, the restaurant industry is expected to remain operational despite the surging COVID-19 cases. Furthermore, strong consumer discretionary spending and pent-up demand should allow restaurants to maintain their current operational  levels.

Given this backdrop, Wall Street analysts expect the prices of popular restaurant stocks The ONE Group Hospitality, Inc. (STKS – Get Rating), Del Taco Restaurants, Inc. (TACO – Get Rating), and Carrols Restaurant Group, Inc. (TAST – Get Rating) to rally by more than 50%.

The ONE Group Hospitality, Inc. (STKS – Get Rating)

STKS is a New York City-based hospitality company that operates upscale lounges and restaurants under the STK and Kona Grill brands. It operates in North America, Europe, and the Middle East through three segments—STK; Kona Grill; and ONE Hospitality.

STKS’ revenues increased 324.6% year-over-year to a record $70.80 million in its fiscal second quarter, ended June 30. This can be attributed to a 38% rise in comparable sales. Its operating income came in at $7.76 million, representing a substantial improvement from its  negative year-ago value. Its net income increased 534.1% from the same period last year to $14.10 million, while its EPS rose 510% from the prior-year quarter to $0.41.

On July 23, the company opened an STK Steakhouse in Washington, D.C., marking its fourth opening so far this year. Through this restaurant opening, STKS successfully expanded its market reach to Washington.

A $70.77 million consensus revenue estimate for its  fiscal third quarter (ending September 2021) indicates a 78.9% improvement year-over-year. In addition, analysts expect its EPS to improve 566.7% from the same period last year to $0.48 in the current  quarter. The company has an impressive earnings surprise history; it beat Street EPS estimates in three out of trailing four quarters. Shares of STKS have gained 421.6% over the past year and 193.2% year-to-date.

The 12-month median price target of $17 indicates a 56.7% potential upside from yesterday’s $10.85 closing price.

Del Taco Restaurants, Inc. (TACO – Get Rating)

TACO operates and franchises quick-service Mexican American restaurants across the country. The Lake Forest, Calif.-based company managed some  600 restaurants spread across 16 states as of June 9, 2021. TACO is the second largest Mexican quick-service restaurant in the United States.

In its fiscal second quarter, ended June 15, TACO’s revenues rose 19.5% year-over-year to $125 million. This can be attributed to an 18.6% rise in company-operated restaurant sales. Its adjusted EBITDA grew 39.7% from the prior-year quarter to $16.90 million, while its adjusted net income improved significantly from its  negative year-ago value to $6.10 million. Its adjusted EPS came in at $0.16, reflecting a substantial rise from the break-even value reported in the same period last year.

TACO has been gradually expanding its market presence by…

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