UPDATE: BMO Capital Markets Initiates Coverage On Panera Bread

BMO Capital Markets initiated coverage on Panera Bread Co. (NASDAQ: PNRA) in a report issued Thursday with a Market Perform rating and $162 price target.

Analyst Andrew Strelzik felt that "Panera is in the early stages of a brand repositioning that could provide material opportunities to reaccelerate growth. However, Panera likely will fall short of expectations over the next 18+ months."

The report observed that "traffic trends remain underwhelming, in our view, and the ability for initiatives to drive a recovery likely will take time. The age of Panera’s store base relative to its peers likely creates a structural traffic issue, and a majority of the Panera 2.0 store design roll-out likely will not take place until 2015/2016."

Strelzik noted that "2014 and 2015 EPS estimates of $6.60 ($6.68 including benefit of 2Q14 insurance settlement) and $6.90 are $0.03 and $0.31 below consensus, respectively. Our price target implies a 23-24x P/E multiple on our 2015 estimate, which is in line with its current and historical average multiple."

The report concluded that "Panera should trade at a discount to the fast casual average (38.5x), as Panera is the most mature fast-casual concept and our multiple implies a 40 percent discount."

Panera Bread Co recently traded at $163.00 in the premarket, down 0.41 percent.