- Oppenheimer names Wendy's (WEN +1.2%) and Starbucks (SBUX +2.2%) as its top two picks in the restaurant sector for 2020.
- On Wendy's: "We believe the Street overlooks the financial risk/reward from breakfast rollout in 2020, and we identify upside to estimates. After 2020, profit growth accelerates from built-in levers at an attractive FCF valuation."
- On Starbucks: "We see a path for predictably strong fundamentals against a 2020 outlook that could prove too conservative, based on our analysis, setting the stage for upside."
- The firm assigns a price target of $26 to Wendy's (+20% upside) and PT of $105 to Starbucks (+15% upside).
- One notch down on the list from Oppy are Domino's Pizza (DPZ +0.2%) and Restaurant Brands International (QSR +1.7%).
- On Domino's: "We are attracted to the setup for accelerating SSS following 4Q19 and best-in-class EBITDA growth in 2020... Our work suggests 2020 EPS is also positioned nicely against consensus as G&A costs become a bigger focus and excess cash from the recent debt deal is deployed for repurchases."
- On Restaurant Brands: "QSR enters 2020 trading at a 15-20% valuation discount vs. peers owing to concerns around Tim Horton’s same-store-sales... We are optimistic trends will stabilize as TH laps loyalty impacts, installs new platforms and comparisons become easy."