Wingstop Among Restaurant Stocks That Could Fly High, While Others Are Grounded

While investors may be wondering if the rally in full-service restaurant stocks is over and if it is time to invest in quick-service restaurant stocks, this is not an “either/or decision,” according to Stephens & Co.

The Wingstop Analyst: James Rutherford maintained an Overweight rating for Wingstop Inc WING, with the price target unchanged at $172.

The Wingstop Thesis: Poor weather conditions in February were favorable for delivery and drive-thru restaurant stocks, Rutherford said in the note.

This was reflected in Wingstop’s first-quarter comps, which handsomely surpassed expectations, he added.

Investors seem to be underestimating the positive impact of the reopening on drive-thru stocks, the analyst noted.

The Stephens & Co. analyst placed the following are full-service, drive-thru, delivery and takeout restaurants in these categories:

Full-service stocks with significant multiple expansion potential:

• BJ's Restaurants, Inc BJRI
• Brinker International, Inc. EAT
• Denny's Corp DENN
• Ruth's Hospitality Group, Inc. RUTH
• Kura Sushi USA Inc KRUS
• Darden Restaurants, Inc. DRI

Full-service stocks that seem to be too expensive

• Cheesecake Factory Inc CAKE
• Texas Roadhouse Inc TXRH
• Chuy's Holdings Inc CHUY

Drive-thru stocks with potential

• McDonald’s Corp MCD
• Wendy’s Co WEN

Delivery/takeout stocks with potential

• Papa John's Int'l, Inc. PZZA
• Wingstop Inc WING