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On Wednesday, RBC Capital adjusted its outlook on Jack In The Box (NASDAQ:JACK) shares, reducing the price target to $70 from $75, while maintaining an Outperform rating. The decision followed the company's third-quarter performance, which did not meet expectations. Jack In The Box reported a miss on comparable sales, alongside a downward revision of its fiscal year 2024 guidance for both of its brands. However, the company's EBITDA exceeded forecasts due to effective cost control measures.
The restaurant chain faces increased pressure from a challenging economic environment that affects its core lower-income consumer base. Despite these challenges, Jack In The Box's development pipeline is expanding, with new and existing markets showing strong average unit volumes (AUVs) well after opening. The company's franchisee profitability remains robust, despite the adverse conditions.
Jack In The Box is actively pursuing menu innovation and adding more value options to attract customers. Additionally, investments in digital capabilities and store renovations are expected to bolster same-store sales (SSS) growth over time. These strategic moves are part of the company's efforts to navigate through the macroeconomic headwinds that have necessitated the adjustment of financial estimates and the price target.
The revised price target of $70 reflects the impact of these macroeconomic challenges. However, RBC Capital reaffirms its positive Outperform rating, noting that the stock is currently trading at approximately 8 times its estimated 2025 enterprise value to EBITDA ratio. This valuation suggests that the analyst firm sees potential for Jack In The Box's stock performance to improve in the long term.
In other recent news, Jack in the Box (NASDAQ:JACK) has unveiled major expansion plans in Chicago, intending to open eight new restaurants in 2025. This move is part of a larger strategy to penetrate new markets, with recent growth observed in multiple states and overseas. The company has also been making strategic moves in its business operations, announcing plans to open 15 new locations in both Georgia and Florida.
Analysts have been closely monitoring these developments. Loop Capital has adjusted its outlook on Jack in the Box, reducing the stock's price target to $87 due to a decline in same-store sales. Despite this, Loop Capital maintains a positive outlook on the company.
Wedbush Securities upgraded the company's stock to "Outperform", citing promising performance in new markets and the ability to meet growth and EBITDA targets.
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