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On Wednesday, Raymond (NSE:RYMD) James analyst Brian Vaccaro maintained an Outperform rating with a $60.00 price target for Cheesecake Factory stock (NASDAQ:CAKE), which currently trades at $50.25. The stock has shown strong momentum with a 43% return over the past year and 31% over the last six months. Following meetings with the company’s executives at the 46th annual Raymond James Institutional Investor Conference, Vaccaro expressed a positive outlook on the stock. The analyst increased earnings per share (EPS) estimates slightly due to the impact of the company’s recently completed convertible note offering, which was upsized to $575 million, including the green shoe option. According to InvestingPro, analysts’ price targets for the stock range from $40 to $67.
During the conference, Cheesecake Factory’s President David Gordon and CFO Matt Clark discussed the factors contributing to the company’s consistent comparable sales outperformance and improved store margins, which are expected to reach 17% in 2024. The company currently maintains a healthy gross profit margin of 39.3% and has demonstrated stable financial performance with a Piotroski Score of 7, according to InvestingPro data. The management also highlighted the growth potential of their North Italia and Flower Child brands. North Italia is anticipated to support approximately 20% annual unit growth with a long-term total addressable market (TAM) of around 200 units. Flower Child is positioned as a polished fast-casual concept with strong average unit volumes (AUVs) and store margins, with an estimated TAM of about 700 units.
The company’s management team sees an opportunity to increase total revenue from the current $3.1 billion to approximately $8.5 billion over time, targeting annual revenue growth of 7-8%. This optimistic revenue projection is detailed in the presentation slides shared during the conference. The company’s current market capitalization stands at $2.6 billion, with a P/E ratio of 15.7x and revenue growth of 4.1% in the last twelve months. For deeper insights into CAKE’s valuation and growth metrics, investors can access the comprehensive Pro Research Report available on InvestingPro, which covers over 1,400 US stocks with detailed analysis and actionable intelligence.
Vaccaro also noted that a key theme at the conference was the observation of softer and more erratic demand trends through February. Several companies attributed this to a combination of factors, including adverse weather conditions, the worst flu season in a decade, and heightened political anxiety affecting consumer sentiment. The concerns mentioned spanned various issues such as inflation, tariff impacts, deportation worries, recent layoffs in the cryptocurrency sector, and the ongoing war in Ukraine. Despite these broader market challenges, Raymond James’ stance on Cheesecake Factory remains positive. InvestingPro analysis reveals that while the stock shows price volatility, it maintains sufficient cash flows to cover interest payments and is expected to remain profitable this year, with several additional ProTips available for subscribers.
In other recent news, The Cheesecake Factory reported fourth-quarter earnings that exceeded expectations, with adjusted earnings per share reaching $1.04, surpassing the analyst consensus of $0.91. The company’s revenue for the quarter was $921 million, a 5% increase from the previous year and above the estimated $912.04 million. Following these results, Raymond James increased its price target for Cheesecake Factory shares to $60, maintaining an Outperform rating, while Piper Sandler raised its target to $51 with a Neutral stance. Oppenheimer analysts also maintained an Outperform rating with a $65 price target, expressing optimism about the company’s potential to exceed its 2025 financial guidance.
The Cheesecake Factory has announced a $450 million convertible senior notes offering, with plans to use part of the proceeds to repurchase shares and repay debt. The company aims to open up to 25 new restaurants in 2025 across its various brands, including North Italia and Flower Child. The expansion is expected to contribute to a projected 6-7% unit growth. Furthermore, the company’s board declared a quarterly dividend of $0.27 per share, payable in March 2025.
Analysts have highlighted the company’s strong fourth-quarter performance, with consolidated store margins reaching new highs, and have noted the positive sales trends despite challenges such as adverse weather conditions. Looking ahead, management has confirmed revenue guidance for 2025, with expectations of continued margin growth, although slightly adjusted due to the timing of new unit openings. The company’s available liquidity as of the end of 2024 was reported at $340.7 million, including a cash balance of $84.2 million.
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