Cheesecake Factory ( NASDAQ: CAKE ) stock slumped on Wednesday after UBS shifted to a bearish stance on the stock.
Equity analyst Dennis Geiger advised clients that the stock’s strong gain in the first 3 weeks of 2023 have elevated risks ahead of a challenging macro backdrop and potential for same store sales to decelerate sharply. He added that margin guidance for the chain is likely over-optimistic, in his view.
“While CAKE could continue to benefit from customer brand affinity and earnings upside potential exists if targets are reached, we think potential pressured industry demand, ongoing cost headwinds and limited macro visibility highlight risk to the recent move higher in shares and expectations,” Geiger concluded. “We're cautious on price elasticity in a pressured spending environment, with resistance to pricing a risk to sales and margins.”
He downgraded the stock to a Sell rating from a prior Neutral. Geiger assigned the stock a $30 price target.
Shares of the California-based restaurant operator fell 3.77% in premarket trading, extending steep declines marked on Tuesday after Raymond James cut its rating .
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Cheesecake Factory cut to Sell at UBS on macro, margin concerns