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On Friday, TD Cowen showed a cautious optimism for Darden Restaurants (NYSE:DRI), increasing the stock's price target to $165 from $150, while maintaining a Hold rating on the shares. The firm's analyst acknowledged the proactive steps being taken by Olive Garden, Darden's flagship brand, to sustain customer traffic. However, concerns were expressed that these efforts might not be sufficient for Darden to meet the 1.4% consensus same-store sales (SSS) expectations.
The analyst pointed out that while the partnership with Uber (NYSE:UBER) could provide some benefits, it is unlikely to significantly affect Darden's performance unless Olive Garden is added to the Uber Eats marketplace. The firm's stance is grounded in a conservative outlook, as they model the lower end of the company's fiscal year 2025 same-store sales guidance. The firm sees a higher likelihood of Darden falling short of its targets rather than exceeding them, leading to the revised price target of $165.
The statement from TD Cowen suggested that while there is recognition of Darden's initiatives to drive traffic, the industry landscape poses challenges that might hinder the company's ability to achieve the consensus same-store sales growth rate. The analyst's comments reflect a measured view of Darden's strategic moves and their potential impact on future sales performance.
Despite the price target increase, TD Cowen's Hold rating indicates that the firm does not see significant upside potential for Darden's stock at the moment. The new price target represents a modest increase in their valuation of the company's shares, suggesting that while they acknowledge some positive developments, they remain cautious about the company's near-term growth prospects.
The analyst's commentary concluded with a note of caution, emphasizing the risks facing Darden Restaurants in the current market environment. The revised price target and the maintained Hold rating indicate a wait-and-see approach, as the analyst weighs the potential benefits of Darden's strategic initiatives against the broader challenges of the market.
In other recent news, Darden Restaurants has seen a flurry of activity from financial analysts following its first-quarter earnings report. Despite falling short of earnings per share expectations, Darden reiterated its full-year guidance, and Jefferies maintained an Underperform rating but increased the price target to $136. Darden's announcement of a pilot delivery program and a new partnership with UBER for white label delivery was met with cautious optimism by analysts, with firms such as Evercore ISI upgrading Darden's stock to "Outperform" and raising the price target to $205.
In addition to these developments, Darden has reported a slight 1% increase in sales, reaching $2.8 billion. The company also announced the future acquisition of Chuy's, which is expected to have a neutral impact on earnings per share. In response to these recent developments, several financial firms have adjusted their projections for Darden. Baird and Stephens raised their targets to $172 and $164 respectively, while BTIG maintained a "Buy" rating and raised the price target for Darden.
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