Wells Fargo On Cheesecake Factory: You Can Have Your CAKE And Eat It, Too

Cheesecake Factory Inc CAKE offers investors exposure to the healthy U.S. consumer and investors should be buyers of the stock ahead of an inflection in top-line growth, according to Wells Fargo.

The Analyst

Wells Fargo analyst Jon Tower upgraded Cheesecake Factory from Market Perform to Outperform with a price target lifted from $46 to $50.

The Thesis

The case for buying Cheesecake Factory's stock is based on multiple catalysts ahead, Tower wrote in a note. Most recently, the company acquired Fox Restaurant Concepts which includes North Italia and will not only diversify the real estate footprint but help drive growth.

Meanwhile, Tower said Cheesecake Factory continues to focus on off-premise dining and accounts for 16% of sales today. This represents an opportunity to contribute 1% to 2% to same-store sales over the next few years from improved consumer awareness, potential new partnerships, and growth from digital.

Management continues to test TV commercials in 12 markets and Tower said this suggests an openness to tools that was "previously shunned" to drive growth. In fact, Cheesecake Factory spends the least amount on marketing among casual dining chains and a successful ad campaign could support same-store sales growth and potentially grow traffic over time.