PTLO - Domino's Pizza Shake Shack named 'Best Ideas' at Piper Sandler
2023-06-14 09:33:01 ET
Restaurant chains Shake Shack ( NYSE: SHAK ) and Domino’s Pizza ( DPZ ) were touted as top picks in a sweeping note assessing the sector on Wednesday.
The note initiated 15 names across the restaurant sector, with the bulk receiving a Neutral rating given industry dynamics and cloudy macroeconomic circumstances in 2023. Of the initiations, only Domino’s, Shake Shack, Portillo’s ( PTLO ), and Wendy’s ( WEN ) were assigned Buy-equivalent ratings. As top picks, Shake Shack ( SHAK ) and Domino’s ( DPZ ) were assigned $84 and $349 price targets, respectively.
“With today marking our initial launch of coverage of the Restaurant sector here at Piper Sandler, we’d point to SHAK as our best idea,” the note stated. “In the event that the macro environment makes it such that the entire Limited Restaurant Owner-Operator sub-segment struggles to work for a period of time, we’d expect SHAK to at the very least exhibit strong relative outperformance in that scenario.”
Domino’s was selected as the second-best pick by the analysts, owing in part to some concerns on the overall pizza category as compared to Shake Shack’s limited service model.
“[Domino’s] is an idea that we really “like” on a relative basis to our other coverage and we are favorable on the Risk-Reward setup. “...we are in essence making a call that a lot of the things that investors are (understandably) worried about right now likely have as much to do with the Pizza category itself as they have to do with Domino’s specifically; and that while there might be two to three tough quarters left, that the next few years will prove out to be just fine.”
Shares of both Shake Shack ( SHAK ) and Domino’s Pizza ( DPZ ) rose modestly after Wednesday’s market open.
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Domino’s Pizza, Shake Shack named ‘Best Ideas’ at Piper Sandler