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On Thursday, TD Cowen analyst Andrew Charles increased the price target for Darden Restaurants (NYSE:DRI) shares to $190 from $180, while keeping a Hold rating on the stock. The company, currently trading at $199.01 with a market capitalization of $22.04 billion, has shown strong momentum with its stock trading near its 52-week high of $203.47. Charles noted the company’s initiatives to enhance performance at Olive Garden as a potential factor for market share growth. Specifically, the collaboration with Uber (NYSE:UBER) Direct was mentioned as a contributing factor to an increase in Olive Garden’s same-store sales (SSS), offering a 1% to 1.25% boost. The company has maintained solid revenue growth of 5.14% over the last twelve months, according to InvestingPro data.
The analyst’s statement highlighted the current premium valuation of Darden Restaurants’ shares compared to historical values. Charles pointed out that even when applying the peak multiple of 13 times forward-year two enterprise value to earnings before interest, taxes, depreciation, and amortization (EV/EBITDA), the resulting share price would be $230. InvestingPro analysis indicates the stock is currently trading above its Fair Value, with a P/E ratio of 22.57x and analyst price targets ranging from $145 to $230. This analysis led him to suggest that there may be better investment opportunities with more favorable risk/reward profiles within the restaurant sector.
Darden Restaurants, the parent company of popular chains such as Olive Garden, has been exploring various strategies to improve its market position. The partnership with Uber Direct is one such strategy aimed at increasing sales through enhanced delivery capabilities.
The price target adjustment by TD Cowen reflects a careful consideration of Darden Restaurants’ current valuation and the impact of its growth strategies. While the analyst sees positive developments from the company’s efforts, the Hold rating indicates a cautious stance on the stock’s potential for significant appreciation in the near term.
Investors and market watchers will likely continue to monitor Darden Restaurants’ performance, especially regarding its ability to capitalize on partnerships and drive same-store sales growth. The company’s success in these areas could be a determining factor in future valuation and analyst ratings. While maintaining a healthy dividend yield of 2.81%, InvestingPro reveals 10+ additional exclusive insights about Darden’s financial health and growth prospects in its comprehensive Pro Research Report, available to subscribers.
In other recent news, Darden Restaurants reported its third-quarter fiscal 2025 earnings, posting an earnings per share (EPS) of $2.80, slightly below the forecasted $2.81, and revenue of $3.2 billion, just under the anticipated $3.22 billion. Despite this minor shortfall, the company experienced a 6.9% increase in EPS compared to the same quarter last year. Following these results, Darden provided guidance for the fourth quarter, projecting total sales between $3.23 billion and $3.26 billion, with same-restaurant sales growth expected to exceed 3%. In analyst updates, Citi raised its price target for Darden Restaurants to $229, maintaining a Buy rating based on strong results and positive outlook, while Jefferies increased the price target to $165 but kept an Underperform rating, citing concerns over valuation and market conditions. Additionally, Truist Securities reiterated a Buy rating with a price target of $212, indicating optimism about the company’s strategic direction. The company also announced plans to open 60-65 new restaurants in fiscal 2026, with significant capital expenditures allocated for new establishments and technology. The recent acquisition of Chuy’s has notably boosted Darden’s "Other Business" segment, contributing to a 20.2% rise in sales.
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