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Stifel Analyst: 3 Casual-Dining Stocks That Could Get Vaccine Boost

Stifel Analyst: 3 Casual-Dining Stocks That Could Get Vaccine Boost
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By    |   Friday, 20 November 2020 09:22 AM

Stifel Analyst Chris O'Cull examined casual-dining stocks, which have jumped about 10% following positive news from Pfizer and its German partner BioNTech about is experimental COVID-19 vaccine.

While he estimates that these companies’ comparable sales are likely drop by a fourth in 2020, “the market is projecting a sharp recovery for the segment,” Barron’s repored.

His analysis led him to raise his 2022 top- and bottom-line estimates for Darden Restaurants (ticker: DRI), whose brands include Olive Garden and Longhorn Steakhouse, Dave & Buster’s (PLAY), and Texas Roadhouse (TXRH).

In a post-vaccine environment, “these popular concepts will most likely be able to take advantage of pent-up consumer demand and, in some cases, restaurant closures by smaller chains and independents,” he wrote, according to Barron's.

He reiterated "hold" ratings on Darden and Texas Roadhouse, although he raised his price target on Darden by $20, to $120, and on Texas Roadhouse by $12, to $82. He has a "buy" rating Dave & Buster’s, and raised his price target to $30 from $24.

Pfizer (PFE) and BioNTech (BNTX) said they plan to file on Friday for an emergency use authorization that could allow their COVID-19 vaccine to be used in the U.S. next month.

The U.S. drugmaker and its German partner said earlier this week that a final analysis of clinical trial data showed the shot was 95% effective at preventing the disease, Bloomberg said.

The filing with the Food and Drug Administration could permit the vaccine to be administered to high-risk populations in the U.S. by the middle to the end of December, the companies said in a statement.

Meanwhile, many of the more than two dozen states that have issued new restrictions amid the recent COVID-19 spike this week have closed or restricted indoor dining and gyms. 

For example, Philadelphia’s ban on indoor dining goes into effect on Friday.

Stock Fishtown and Stock Rittenhouse, which are owned by Philadelphia-based restaurateur Tyler Akin, will shift to carry-out and delivery mode. On Monday new rules in Delaware will force him to reduce capacity at his Le Cavalier restaurant in Wilmington to 30%, down from the current 50%. Though better than being entirely closed down, as was the case in March, Akin may need to adjust staffing to fit revenue, Reuters explained.

“We have some really hard conversations ahead of us,” he said.

Efforts to adapt business to the realities of the pandemic may allow some restaurants and bars to weather the worst effects of the restrictions. In Oakland, California, as in many cities around the country, restaurants and bars have built platforms decked out with tables, chairs and propane heaters to make customers more comfortable outside in chillier weather.

It’s “a way to keep our businesses afloat,” said Ari Takata-Vasquez, who leads a small-business alliance in Oakland that has raised money to build the outdoor dining areas for cash-strapped eateries.

She’s working on, or completed, five of them - and has 30 eateries and gyms on the waiting list.

To be sure, many market experts say one can't underestimate just how much COVID vaccines will change daily life, Reuters reported.

“It’s all about the vaccine. If Pfizer’s vaccine is as good as people are saying it is that’s a game changer for consumer behavior and a lot of the trends we’ve seen of the cyclical sectors being depressed are going to reverse on that hope that this is the beginning of the end of our dealing with COVID-19,” said Chris Zaccarelli, Chief Investment Officer, Independent Advisor Alliance, Charlotte, North Carolina.

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Stifel Analyst Chris O'Cull examined casual-dining stocks, which have jumped about 10% amid recent news of possible COVID-19 vaccines.
casual, dining, stocks, restaurants
Friday, 20 November 2020 09:22 AM
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