Why This Denny's Analyst Is Turning Bullish

There is an upside to Denny's Corp.’s DENN current expectations for the back half of 2022 and 2023, while the company’s long-term prospects remain intact under new CEO Kelli Valade, according to Wedbush.

The Denny's Analyst: Nick Setyan upgraded the rating for Denny's from Neutral to Outperform, while raising the price target from $10 to $12.50.

The Denny's Thesis: For the third quarter, the company has guided to same-store sales growth of flat to 2%, while mid-quarter checks indicate upside to the consensus estimate of 0.8%,” Setyan said in the upgrade note.

“The primary drivers of near-term SSS growth are management's incremental focus on value, the continued increase in 24/7 units, and the precipitous fall in gas prices,” the analyst mentioned.

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“We increase our Q3 company SSS growth estimate to 2.5% from 2.0%. We increase our franchised Q3 SSS growth estimate to 1.5% from 1.0%,” he added.

“DENN's historical drivers of consistent 10%+ annual EPS and FCF/share growth are unlikely to change under new CEO Kelli Valade,” Setyan wrote. The analyst further mentioned that the Keke's Breakfast Café acquisition was on track for successful integration.

DENN Price Action: Shares of Denny's had climbed by 10.87% to $10.40 at the time of publication Tuesday.

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