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Morgan Stanley (NYSE:MS) raised its price target on Darden Restaurants (NYSE:DRI) to $235 from $215 on Monday, while maintaining an Overweight rating on the stock. Currently trading at $224.78, the stock has delivered an impressive 53% return over the past year. The firm cited improved performance at Olive Garden and overall strength in the casual dining segment. According to InvestingPro, 16 analysts have recently revised their earnings estimates upward for the upcoming period.
The research firm noted Darden stock has gained approximately 25% over the past quarter, reflecting a significant sentiment shift from last year when Olive Garden was experiencing difficulties. The stock is currently trading near its 52-week high of $226.98, though InvestingPro analysis suggests the stock is in overbought territory based on RSI indicators. Morgan Stanley believes these issues may have been more cyclical than structural, with the restaurant chain now positioned to guide fiscal year 2026 from a position of relative strength.
Olive Garden’s recent improvements stem from multiple factors, according to the analysis, including its delivery expansion, marketing initiatives, product innovation, and easier year-over-year comparisons. The firm also highlighted that Darden’s delivery service is already expanding to other brands within its portfolio.
Morgan Stanley expects Darden will likely provide first-half-weighted guidance for the upcoming fiscal year. The firm believes sales at or above the high end of Darden’s long-term framework could drive margin improvements throughout the year, despite some potential cost-of-goods headwinds.
The new $235 price target assumes Darden will maintain its current price-to-earnings multiple of approximately 21x, which sits a few turns above its historical average. The stock currently trades at a P/E ratio of 25.05x, and InvestingPro analysis indicates the stock is trading above its Fair Value. While acknowledging this valuation premium might not be permanent, Morgan Stanley suggested the company’s fundamentals currently justify the higher multiple for what it considers a quality large-cap name with solid trends. For deeper insights into Darden’s valuation metrics and over 30 additional ProTips, consider exploring the comprehensive Pro Research Report available on InvestingPro.
In other recent news, Darden Restaurants is preparing to release its fourth-quarter earnings report, with analysts projecting earnings per share of at least $2.90, slightly below the Street consensus of $2.94. Stifel, maintaining a Buy rating and a $215 price target, anticipates "solid comp improvement" at Olive Garden and continued momentum at LongHorn Steakhouse. Meanwhile, Evercore ISI has raised its price target for Darden to $250, citing Olive Garden’s strength and the company’s focus on profitable sales growth. Raymond (NSE:RYMD) James also increased its price target to $230, driven by strong traffic data suggesting upside potential for comparable sales at both Olive Garden and LongHorn Steakhouse.
KeyBanc followed suit by raising its price target to $230, highlighting Olive Garden’s accelerated growth due to effective promotions and delivery services. Analysts from these firms expect Darden’s fiscal year 2026 guidance to reflect long-term growth assumptions, with Stifel projecting earnings per share of $10.55 and Raymond James estimating $10.84. Despite ongoing challenges like commodity inflation, Darden’s supply chain and labor strategies are expected to mitigate margin pressures. These developments indicate a positive outlook for Darden’s brands, as they continue to benefit from improved value perception and strategic initiatives.
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