Restaurant Brands Analyst Bullish On Upcoming Catalysts For Burger King Owner

Restaurant Brands International Inc QSR was the only large-cap quick-service restaurant to end 2020 in the red, but the company has catalysts ahead to reverse its losses in 2021, according to Stephens.

The Restaurant Brands Analyst: James Rutherford upgraded Restaurant Brands from Equal-Weight to Overweight with a price target lifted from $55 to $73.

The Restaurant Brands Thesis: RBI's woes existed prior to the onset of the COVID-19 crisis and the pandemic merely exasperated its headwinds, Rutherford said in a Thursday upgrade note.

RBI was a top short idea last year, but now is the time to switch course and turn bullish on the stock, the analyst said. 

Burger King's U.S. business faces the easiest comp setup within the quick-service burger category as early as the first quarter, he said.

Specifically, Burger King is lapping a negative 6.5% comp versus positive 0.1% at rival Mcdonald's Corp MCD.

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"This is just optics, but at its core we also tend to believe in a certain level of mean reversion in fast food trends, and we find ourselves wondering how long BK can continue losing share before it turns the ship," Rutherford said. 

Elsewhere, RBI's Tim Horton's unit in Canada should benefit as the country proceeds with its vaccination efforts, the analyst said.

The coffee and food chain doesn't have to show a "great" recovery, rather a good enough sentiment will "trend positively" for the stock, he said. 

Finally, RBI remains a heavily shorted stock and could benefit from a rotation away from other restaurant names with "lofty valuations" into lower performers like RBI, according to Stephens. 

QSR Price Action: Shares of Restaurant Brands were trading higher by 5% to $63.41 Thursday.