EAT - Del Taco: Hold As Uncertain Sales Outlook Offsets Robust Liquidity
Investment Thesis
As lockdown measures hurt the dine-in-dependent full-service sector, the QSR and fast-casual operators have survived fairly well due to a stronger off-premise business. However, the valuation multiples hardly reflect the contrasting outlook across the sector with full service and fast-casual operators commanding a significant premium. Despite its little reliance on the on-premise business, the sales prospects of Del Taco Restaurants, Inc. (TACO) remain bleak as persisting social distancing measures delay a sales recovery amid a sharp recession. Meanwhile, the rising wage inflation in its key market and the heavy reliance on third-party delivery