Competition In The Burger Category Might Keep Red Robin From Taking Flight

Canaccord Genuity initiated its coverage on Red Robin Gourmet Burgers, Inc. RRGB with a Hold rating. The brokerage has a price tag of $53 on the company's shares.

The analysts, Lynne Collier and Philip May, believe the upcoming months will show little change, citing competition in the burger space and macro headwinds. Furthermore, the analysts think the company's SSS and traffic are likely to continue facing challenges.

Canaccord said, "Also, we note significant management changes in recent months, with the CEO and CFO both resigning in the span of two months. While RRGB's valuation is compelling at 5.9x ‘17E EBITDA, we believe that if SSS continue in negative territory over the coming months (which we believe is likely), shares will be range bound."

Related Link: Why Canaccord Only Has An Appetite For These 4 Restaurants

Interestingly, Red Robin Gourmet Burgers suffered a setback in the most recent quarter by reporting lower-than-estimated EPS. In the preceding three quarters, its EPS exceeded the Street's estimates.

The brokerage pointed out that the current share price suggested a potential 6 percent upside and it was based on its 6.4X its 2017 EBITDA projection of $157.3 million.

At time of writing, Red Robin was up 0.97 percent on the day at $51.15.

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