JPMorgan Backs CAVA's Expansion Potential As Yum! Brands Plans Major Taco Bell, KFC Growth
The recent volatility in restaurant chain stocks has provided "some opportunities," according to JPMorgan.
While consumer confidence data has dipped, resulting in consumers becoming more careful in their discretionary spending, total industry supply growth has remained "surprisingly resilient, up 12% from 3Q18 to 3Q24 for a CAGR of ~2%," analyst John Ivankoe said in the note.
CAVA Group
Ivankoe upgraded the rating for CAVA Group Inc (NYSE:CAVA) from Neutral to Overweight, while establishing a price target of $110.
CAVA Group has "significant U.S. white space for expansion from its already multi-market success," the analyst said in the note. The company is generating free cash flows "unusually early" and has near-term initiatives in place to drive sales and profits, he added.
Ivankoe recommended a "buy now and own for the long-term" approach for the stock, as the company's current 367 units are expanding beyond 1,000 units.
Check out other analyst stock ratings.
Yum! Brands
The analyst maintained a Neutral rating for Yum! Brands Inc (NYSE:YUM), while raising the price target from $138 to $160.
The stock rose around 10% after the company announced better-than-expected results and its "tech-fee recapture is now appreciated by broad market," the analyst wrote. Each $100 million of tech-fee recapture is worth around 28 cents per share, as the company aims at easing operations for franchisees, he added.
Taco Bell US is likely to grow from 7,604 units to 9,000 by 2030, while Taco Bell International could grow from 1,153 to 2,000, Ivankoe said. "We assume KFC international (ex-China) grows from 16,664 to 22,300 units and KFC China from 11,648 to 19,400 units," he stated.
CAVA, YUM Price Action: Shares of CAVA Group had jumped 5.27% to $85.27, while Yum! Brands had risen 0.15% to $157.25 at the time of publication on Thursday.
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Latest Ratings for YUM
| Date | Firm | Action | From | To |
|---|---|---|---|---|
| Feb 2022 | Cowen & Co. | Upgrades | Market Perform | Outperform |
| Dec 2021 | Barclays | Maintains | Equal-Weight | |
| Dec 2021 | Atlantic Equities | Upgrades | Neutral | Overweight |
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