Stifel Downgrades Zoe's Kitchen On Recession Fears

Stifel downgraded Zoe's Kitchen, Inc. (NYSE: ZOES) to Hold from Buy on potential U.S. recession concerns. But, Stifel sees an upside of 6 percent based on its fair value estimate of $40 over the closing price of $37.68 on Monday.

The brokerage, however, cut its fair value estimate to $40 from $52 as it expects the U.S. economy will likely fall into recession within the next 3-9 months.

"We have grown extremely cautious on the restaurant industry as a whole, and today we downgrade ZOES from Buy to Hold and remove the name from the Select List, mainly to reflect our bearish Macro Sentiment and limited earnings/comp upside opportunity ahead of likely U.S. recession," analyst Paul Westra wrote in a note.

Related Link: Stifel Expects A Recession Within 3 To 9 Months; Bearish On Restaurants

"Accordingly, for ZOES within this assumed worsening macro and competitive backdrop, today we reduce our 3Q 2016-4Q 2016-2017 Comp and EPS estimates to +5.0%E/+3.5%E/+3.5%E (vs. consensus' +5.5%E/+4.1%E/+4.3%E) and $0.05E/-$0.04E/$0.23E(vs. consensus' $0.06E/-$0.03E/$0.24E)," Westra added.

Westra also trimmed his fiscal year 2016 EPS forecast to $0.13 from $0.18 on revenue of $280.6 million (down from $280.9 million).

At the time of writing, shares fell 4.94 percent to $35.82.