Contrarian investors have opportunities for double-digit percentage gains in inflation-battered stocks, if gas prices come down
These are among the restaurant stocks favored by analysts for double-digit gains over the next 12 months.
Have your spending habits changed? A combination of inflationary pressures appears to be behind a recent selloff in stock prices for restaurant operators.
But many sell-side analysts, or those working for brokerage firms, believe that weakness is overdone, as they see tremendous upside potential for many stocks in the industry.
The national average gasoline price is $4.28 a gallon, according to AAA, up 7% from a month ago, and 34% higher than a year ago. The government's wholesale inflation report for August showed that prices for the transportation of passengers climbed 4.1% in a month.
You might decide against a shopping trip that might not be necessary, since you can order items online, likely with free shipping. And this, along with other rising expenses and rising interest rates, might have you thinking twice before hauling the family for a dining experience.
Among the 18 restaurant stocks in the S&P 1500 Composite Index XX:SP1500, all but one were down for one week through Wednesday, and the group was down a weighted 5.8%, while the S&P 500 SPX was down only 0.4%.
The hardest-hit among the 18 restaurant stocks for the week through Wednesday were Cava Group $(CAVA)$ and Wendy's (WEN), which were down 8.5% each, while the only stock in the group that was up for the week was $Aramark(ARMK-W)$ (ARMK), which rose 0.3%.
Many investors will shy away from a discretionary industry such as restaurants, as people are facing so much cost pressure. Then again, consider that West Texas Intermediate crude oil (CL00) is close to $100 a barrel (up from $57.42 at the end of last year). Contrarian investors might jump aboard certain restaurant stocks, hoping for gains if oil (and gasoline) prices slide when the conflict between the U.S. and Iran ends.
So here are all 18 restaurant stocks in the S&P Composite 1500, ranked by the percentage of "buy" or equivalent ratings among analysts polled by LSEG. The table includes projected sales growth for calendar 2027, based on consensus estimates among the analysts, as well as consensus price targets:
Company Share "buy" ratings Sept. 9 price Consensus price target Implied 12-month upside potential Projected 2027 sales growth Dutch Bros. 96% $44.96 $79.25 76% 24% Aramark 88% $56.91 $68.55 20% 9% Wingstop 83% $110.58 $203.01 84% 16% Brinker International 74% $215.31 $268.17 25% 5% Chipotle Mexican Grill 70% $36.03 $44.07 22% 11% Cava Group 62% $56.51 $88.74 57% 21% McDonald's 59% $253.48 $316.73 25% 5% Darden Restaurants 59% $209.42 $229.73 10% 5% Shake Shack 54% $63.01 $83.21 32% 15% Texas Roadhouse 50% $179.27 $218.03 22% 9% Domino's Pizza 47% $321.46 $383.64 19% 2% Yum Brands 46% $145.16 $173.38 19% 5% Starbucks 43% $100.04 $111.10 11% 3% BJ's Restaurants 40% $60.78 $75.38 24% 4% Cracker Barrel Old Country Store 20% $51.15 $43.75 -14% 2% Cheesecake Factory 19% $103.61 $92.00 -11% 7% Papa John's International 19% $21.63 $32.34 50% -2% Wendy's 15% $7.54 $7.86 4% 0% Source: LSEG
For context, the S&P 500 is expected to increase revenue by a weighted 8.7%, based on consensus estimates, according to FactSet. And the S&P Composite 1500 restaurant industry group is expected to increase sales by a weighted 7.2%.
Click on the tickers for more about each company.
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