Citi cuts Jack in the Box stock target to $31, maintains neutral

On Thursday, Citi analysts, led by Jon Tower, revised the price target for Jack In The Box (NASDAQ:JACK) stock, reducing it significantly to $31.00 from the previous $41.00 while keeping a Neutral rating on the shares. The stock currently trades at $25.42, having fallen over 55% in the past year, though it has shown resilience with a 9.5% gain in the past week. According to InvestingPro data, analyst targets for the stock range from $24 to $65, reflecting mixed sentiment in the market. The adjustment comes in response to the company’s updated store closure forecast, which now includes an additional 80-120 closures by December 31, 2025, beyond the 1.5%-2.0% fiscal year 2025 closure rate previously guided.

The analysts noted that while the closures might provide a mid-single-digit lift to franchise system average unit volumes (AUVs), they remain skeptical about Jack In The Box receiving acknowledgment for future plans of consistent net unit growth, especially considering the risk of further closures. The company’s financial health score from InvestingPro is currently rated as "FAIR," with notable strengths in relative value but challenges in price momentum and growth metrics. The firm’s stance is influenced by the need for a more consistent and positive same-store sales (SSS) trajectory before recognizing potential growth plans.

In light of the recent developments, Citi has also adjusted its earnings per share (EPS) estimates for Jack In The Box. The fiscal year 2025 and 2026 EPS projections have been lowered to $5.24 and $5.25, respectively, down from the initial estimates of $5.39 and $5.86. This revision reflects the impact of additional franchisee closures and softer same-store sales on the year-over-year profit trajectory.

The new price target of $31 is based on a 7.5x multiple of the next twelve months’ estimated EBITDA, which remains unchanged, as does the valuation at approximately 0.5 times the market. Citi’s revised price target suggests a balanced view, taking into account the potential benefits from announced strategic initiatives against the backdrop of weaker second-quarter trends and fiscal year 2025 guidance. The company currently maintains a significant 6.9% dividend yield and shows a strong free cash flow yield, according to InvestingPro, which offers 12 additional exclusive insights and a comprehensive Pro Research Report for deeper analysis of JACK’s financial position and growth prospects.

In other recent news, Jack in the Box Inc. has announced its second-quarter results for fiscal year 2025, revealing a decline in same-store sales by 4.4% for Jack in the Box and 3.6% for Del Taco, with adjusted EBITDA ranging between $66 million and $68 million. The company is implementing a strategic initiative named the JACK on Track plan, which includes discontinuing dividend payouts and selling selected real estate to reduce debt. Jack in the Box is also considering strategic alternatives for Del Taco, potentially including its sale, with BofA Securities assisting in the process. Analysts have adjusted their outlooks, with Stifel lowering its stock price target to $35 while maintaining a Hold rating, citing weak sales trends. Similarly, Jefferies reduced the price target to $41, maintaining a Hold rating, while RBC Capital adjusted its target to $45, continuing with an Outperform rating, acknowledging better-than-feared first-quarter earnings. The company has also announced plans to close 150-200 underperforming restaurants by the end of 2025 as part of its efforts to streamline operations. Additionally, Jack in the Box shareholders recently approved the election of board members and executive compensation, reflecting strong confidence in the company’s leadership. These developments highlight the company’s ongoing efforts to enhance its financial performance and strategic direction amidst challenging market conditions.

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