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On Monday, Stifel analysts upgraded Jack in the Box (NASDAQ:JACK) stock from Hold to Buy, adjusting the price target to $32.00 from the previous $35.00. The stock, currently trading at $24.52, has seen significant pressure, down over 56% in the past year. According to InvestingPro analysis, the company appears undervalued, with 5 analysts recently revising their earnings expectations upward. The upgrade comes in light of recent strategic moves by the company, including the appointment of a new CEO, Lance Tucker, and his plan to improve the company’s financial health.
The analysts at Stifel have identified last week’s announcement as a pivotal moment for Jack in the Box. They believe that the new CEO’s strategy to reduce debt by over $300 million in the next 12 to 18 months will significantly enhance the company’s equity value, which is currently at $460 million. This debt reduction is particularly crucial given the company’s total debt of $3.17 billion and current ratio of 0.5, as reported by InvestingPro. This debt reduction is a key component of Tucker’s plan to strengthen the balance sheet and simplify the company’s investment narrative.
Furthermore, the analysts noted that Jack in the Box, as a highly franchised, super-regional brand, has substantial potential for comparable store sales growth. The company’s decision to close 200 underperforming units is expected to relieve the drag on franchisee profits and position Jack in the Box more competitively in the market. Despite recent challenges, the company maintains a notable 7.18% dividend yield and has maintained dividend payments for 12 consecutive years.
Stifel’s analysts also pointed out that the focus on a single brand following the divestiture of Del Taco is a positive move. They predict that if Jack in the Box can maintain its comparable sales above the recently lowered expectations of the Street, there is a possibility for the stock to surpass the $32 target price within the next year.
The analysts concluded their remarks by highlighting the importance of the company’s comparable sales performance. They suggest that if Jack in the Box can achieve higher than estimated comparable sales, the stock could appreciate beyond their set target price. The firm’s analysis reflects confidence in the company’s current valuation, which is approximately 7 times their forecasted fiscal year 2026 EBITDA. For deeper insights into Jack in the Box’s valuation and growth potential, investors can access comprehensive analysis and 12 additional ProTips through InvestingPro’s detailed research reports.
In other recent news, Jack in the Box has unveiled its "JACK on Track" plan aimed at improving financial performance by transitioning to an asset-light business model, which includes selling real estate and discontinuing its dividend to reduce debt. The company has pre-announced a same-store sales decline of 4.4% for Jack in the Box and 3.6% for Del Taco in its fiscal second quarter, with adjusted EBITDA between $66 million and $68 million. As part of its restructuring, Jack in the Box plans to close 150-200 underperforming restaurants by the end of 2025 and is considering strategic alternatives for Del Taco, potentially including a sale. Stifel analysts have maintained a Hold rating on the stock, lowering the price target to $35, citing weak comparable sales trends. Similarly, Citi analysts have reduced their price target to $31 while maintaining a Neutral rating, due to anticipated additional store closures and revised earnings estimates. In a recent shareholder meeting, Jack in the Box’s board members and executive compensation received strong approval, with KPMG LLP ratified as the independent auditor. These developments reflect the company’s ongoing efforts to streamline operations and enhance financial stability amidst challenging market conditions.
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