Benchmark Analyst Bumps Up BJ's Restaurants Price Target By 17% Citing Anticipated Margin Recovery

Benchmark analyst Todd M. Brooks has reiterated a Buy rating on the shares of BJ’s Restaurants Inc BJRI and raised the price target from $35 to $41.
The analyst believes that FY23 and FY24 are both likely to prove to be strong margin recovery years for BJRI and sees restaurant-level margins rebounding from an estimated 11.1% in FY22 to 14% in FY24.
Management fully believes that the company will return to mid-teens plus restaurant level margins over time but a return to 14% restaurant level margin in FY24 unlocks meaningful adjusted EBITDA improvement, added the analyst.
The analyst lowered the 4Q22 same-store sales assumption from an overly aggressive 8.5% to 7.0%, reflecting the industry-wide slowdown in traffic that casual dining concepts experienced in November before rebounding in December with improved holiday traffic.
Restaurant concepts are enjoying a y-o-y traffic lift as the analyst is lapping the severe operational disruption in January/February ’22 from the Omicron variant and its impact on staffing levels.
As announced in the 2Q22 conference call, BJRI management launched a margin improvement initiative that is targeted to generate 200 bps of cost savings for the company, added the analyst.
The initiatives largely in place by mid-2023 will provide visibility into margin improvement that is not dependent on further menu price increases or commodity inflation, cited the analyst.
As BJRI has materially lagged the commodity inflation experienced with menu price offsets, the analyst expects that the concept will continue to take price in FY23.
Price Action: BJRI shares are trading higher by 2.03% at $31.20 on the last check Wednesday.

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