Attention Restaurant Stock Investors: Delivery Has Become The Next Big Thing

The restaurant space may be getting a bit more appetizing for investors these days. Deutsche Bank analyst Brett Levy just raised price targets for a handful of restaurant stocks generating positive sales momentum, gaining market share from rivals and embracing technological innovation.

Delivery is the next major growth driver in the space, according to Levy.

“With consumers’ changing behaviors, consumption patterns and demand shifting towards delivery and off-premise, the industry is trying to avoid pitfalls other terrestrial consumer segments (incl. traditional retail) are facing,” Levy said (see his track record here).

Related Link: Where Do Restaurant Stocks Stand In A World Dominated By Amazon?

Restaurant stocks have mostly lagged the market so far in 2017, with the average stock up just about 0.6 percent year to date. However, top performer McDonald’s Corporation MCD, which is in the process of adding mobile and kiosk ordering technology, is up 28 percent in 2017.

But while innovation is important, investors will likely still continue to reward restaurants that deliver strong same-store sales growth, Levy said. With overall restaurant SSS numbers on the decline, investors may reward the positive standouts via multiple expansion.

Heading into the second half of the year, Deutsche Bank has adjusted its price targets for the following seven restaurant stocks:

• Bloomin’ Brands Inc BLMN: Hold rating, price target raised from $21 to $24.
• Buffalo Wild Wings BWLD: Buy rating, price target lowered from $180 to $165.
• Chipotle Mexican Grill, Inc. CMG: Sell rating, price target raised from $300 to $350.
• McDonald’s: Buy rating, price target raised from $155 to $175.
• Ruth’s Hospitality Group, Inc. RUTH: Buy rating, price target raised from $22.50 to $24.
• Texas Roadhouse Inc TXRH: Hold rating, price target raised from $49 to $53.
• Yum! Brands, Inc. YUM: Hold rating, price target raised from $71 to $75.
• Zoe’s Kitchen Inc ZOES: Hold rating, price target lowered from $15 to $13.