Street Calls of the Week
Investing.com - UBS raised its price target on Cheesecake Factory (NASDAQ:CAKE) to $50.00 from $45.00 on Friday, while maintaining a Sell rating on the restaurant chain’s stock. According to InvestingPro data, the stock currently trades at $62.38, near its 52-week high of $65.99, suggesting potential overvaluation relative to analyst targets ranging from $45 to $75.
The firm anticipates Cheesecake Factory will report second-quarter same-store sales trends above the consensus estimate of 1.1%, potentially reaching around 1.5% when the company reports results on July 29. UBS also expects earnings per share to exceed the current consensus of $1.06. InvestingPro analysis shows the company maintains a healthy gross profit margin of 39.65% and has demonstrated strong revenue growth of 4.42% over the last twelve months.
UBS projects potential modest increases to Cheesecake Factory’s fiscal year 2025 guidance, including total revenue of approximately $3.76 billion and net margins of 4.75%. Key focus areas for the upcoming earnings report include insights into third-quarter traffic and sales trends, commentary on pricing and product mix, and updates on performance of the North Italia and Flower Child brands.
Despite solid execution in recent quarters and strong year-to-date share performance of 30.5%, UBS remains cautious about macroeconomic challenges and industry pressures that could impact sales outlook.
The firm notes that Cheesecake Factory’s current valuation at 11x EBITDA exceeds its five-year average of 9x, while investor sentiment has shifted more positive, contributing to UBS maintaining its Sell rating despite the price target increase.
In other recent news, The Cheesecake Factory reported a strong financial performance for the first quarter of 2025, with earnings per share (EPS) reaching $0.93, surpassing analyst expectations of $0.81. The company generated total revenues of $927.2 million, which was slightly below the forecast of $928.07 million but still near the high end of their guidance. Additionally, shareholders approved the Second Amendment to The Cheesecake Factory Incorporated Stock Incentive Plan during the company’s annual stockholders’ meeting. All directors were re-elected, and the selection of the accounting firm was ratified with over 41 million votes in favor. Notably, the company’s executive compensation received significant support with 36,305,080 votes for the proposal.
The Cheesecake Factory continues to focus on menu innovation and staff retention, contributing to improved restaurant-level margins. The company has achieved six consecutive quarters of over 20% earnings growth, emphasizing its operational strength. Looking ahead, The Cheesecake Factory plans to open up to 25 new restaurants in 2025, with total revenues projected at approximately $3.76 billion for the fiscal year. The company also anticipates low single-digit inflation across commodities, labor, and operating expenses. In addition, analysts have noted the company’s ability to manage macroeconomic challenges effectively, which contributes to its stable market conditions.
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