🧠 Watchlist Winners: Copy Legendary Investors' Portfolios in One ClickCOPY FOR FREE

Piper Sandler cuts Shake Shack and 2 other restaurant stocks to Neutral

Published 08/19/2024, 10:32 PM
© Reuters.
SHAK
-
BROS
-
SG
-

Piper Sandler analysts adjusted its stance on several restaurant stocks Monday, downgrading Dutch Bros (BROS), Sweetgreen (SG), and Shake Shack (NYSE:SHAK) to Neutral from Overweight.

Sweetgreen shares fell more than 6% after the market open, while SHAK and BROS lost around 2% each.

For Dutch Bros, the downward revision comes despite Piper Sandler's recognition of CEO Christine Barone's achievements and the potential sales tailwind from the company's Mastery of All Operations and Production (MOAP) initiative expected around 2025.

However, concerns about the company's position in a high-risk segment of the industry and its balance sheet compared to peers prompted a reassessment of the risk-reward balance.

Similarly, Sweetgreen's rating was revised due to a reevaluation of stock selection risks, despite the firm's positive outlook on the company's long-term growth and the potential of its Infinite Kitchen technology.

“We think the Risk-Reward has become more balanced at current levels, hence the rating change. From our perspective, we wouldn’t be surprised if absolute share price upside was a bit harder to come by over the balance of this year,” analysts wrote.

Lastly, Shake Shack's downgrade was driven by anticipated challenges in menu pricing and the general industry environment. While Piper Sandler remains optimistic about the company's long-term growth opportunities, the firm anticipates that realizing further share price gains may become increasingly difficult.

“Investor expectations have increased in lock-step and the industry backdrop has seemingly gotten worse over the time period; which introduces execution risk into the equation from a go forward perspective.”

Coming out of the Q2 earnings season, Piper Sandler's downgrades point to tempered expectations about the broader Fast Casual sub-sector, which has navigated this year notably well so far.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.