Citi raises Cracker Barrel price target to $42, maintains Sell rating

On Friday, Citi analyst Jon Tower increased the price target on Cracker Barrel (NASDAQ:CBRL) shares to $42.00, up from the previous $42.00, while keeping a Sell rating on the stock. The restaurant chain, currently valued at $1.26 billion, maintains a "Fair" overall financial health score according to InvestingPro analysis. Tower provided insight into the company’s current position, expecting the third fiscal quarter to be another period of transition. He noted that while Cracker Barrel might see some top-line benefits from increased pricing and a shift in marketing strategy, profitability could be impacted negatively as the company progresses through stages of long-term operational initiatives.

The analyst anticipates that Cracker Barrel will continue to communicate its progress on turnaround efforts. However, he expressed skepticism about the stock’s potential for a favorable risk-reward balance leading up to the earnings release. This caution is due to several factors affecting the industry, including persistent financial pressures on lower-income consumers, escalating capital expenditures with uncertain returns, and a significant rally in Cracker Barrel’s share price over the last three months.

Cracker Barrel’s stock has seen a notable increase of approximately 19% over the past quarter, with InvestingPro data showing a strong 26.97% return over the past year. The stock currently trades at a P/E ratio of 35.14x, significantly higher than Tower’s estimate, while maintaining a 44-year streak of consecutive dividend payments. Technical indicators suggest the stock is in overbought territory, making it potentially overvalued compared to peers. For deeper insights into Cracker Barrel’s valuation metrics and more exclusive ProTips, investors can access the comprehensive Pro Research Report available on InvestingPro.

The analyst’s commentary underscores the challenges Cracker Barrel faces in the current market environment. Despite the upward adjustment in the price target, the Sell rating indicates that Citi maintains a cautious stance on the stock’s future performance.

Investors and market watchers will be looking to see how Cracker Barrel’s strategic moves and operational changes will play out in the coming quarters, particularly with the next earnings report due on June 10. With a current analyst consensus recommendation of 3.1 (Hold) and price targets ranging from $39 to $63, InvestingPro subscribers can access detailed analysis and additional metrics to make more informed investment decisions as the company aims to navigate through the industry’s headwinds and capitalize on any potential growth opportunities.

In other recent news, Cracker Barrel Old Country Store reported robust financial results for the first quarter of fiscal year 2025, exceeding earnings expectations with an adjusted earnings per share (EPS) of $1.38, compared to the forecasted $0.99. The company’s revenue also surpassed projections, reaching $949.4 million against an expected $939.97 million. Truist Securities responded to these results by upgrading Cracker Barrel’s stock rating from Hold to Buy, citing the company’s successful turnaround efforts and setting a new price target of $55. Despite these positive developments, BofA Securities maintained an Underperform rating, lowering its price target to $48, reflecting concerns over broader industry challenges.

Cracker Barrel’s strategic initiatives, including menu innovation and improved service levels, have contributed to enhanced customer satisfaction and operational efficiency. These efforts have allowed the company to implement significant pricing adjustments, resulting in better customer traffic and improved margins. Benchmark analysts, however, maintained a Hold rating on Cracker Barrel shares, noting the complexities of executing a strategic overhaul amid a weakening consumer environment. The firm revised its same-store sales estimates, citing softer-than-expected traffic trends influenced by adverse weather and consumer confidence dips.

Overall, Cracker Barrel’s management remains committed to its strategic transformation plan, with expectations of continued growth and efficiency gains. The company anticipates improvements in traffic and labor productivity in upcoming quarters, supported by ongoing investments in transformation initiatives and menu innovations. As Cracker Barrel navigates through industry challenges, investors and analysts will continue to closely monitor its performance.

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