Which Restaurant Stocks are a Good or Bad Investment Come 2019?

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When it comes to the stock market, analysts are always trying to make predictions that will pay off.

So what will 2019 bring when it comes to restaurant stocks?

According to a recent report from “Barron’s,” analysts are recommending that traders consider investing in restaurant brands with massive growth potential, instead of the stocks that are trading at low prices.   

“We favor companies with clear same-store sales drivers and are less focused on bargain-hunting in these later stages of the cycle, as it remains a challenging environment for turnarounds, especially in full-service,” writes the Investment Banking Firm Jefferies.

Analyst Andy Barish agrees and isn’t recommending purchasing any full-service restaurant stocks. He thinks Red Robin, in particular, is a poor investment.  

Interestingly, he recommends investing in Chipotle Mexican Grill, a restaurant chain that has been slowly trying to recover from its food safety crisis of 2015.

“Chipotle, which it thinks will continue to benefit from the work undertaken by new management to drive store traffic, grow the digital business, and boost efficiency while growing same-store sales around 6%. The stock was recently about flat near $441; Jefferies’ price target is $550,” writes “Barron’s.”

Then Barish also said that the QSR chains McDonald’s and Starbucks are other restaurant stocks that are poised to perform well on this market.  

Jefferies anticipates that same-store sales for McDonald’s will spike by 3 percent over the next two years. The firm also predicts that Starbucks shares will increase to $76 from the recent $65.

Barish mentions the threat of Amazon as a reason why restaurant stocks are more attractive versus retail stock.  

““We continue to expect premium valuations for the best performers, especially as [the] supply of investable restaurant equity diminishes further...and investors continue to see value in restaurants’ relatively stable trends versus retail, and insulation from risks around tariffs and Amazon.com [AMZN],” said Barish.

Read more about why these restaurant stocks are expected to have a great 2019 at “Barron’s” now.

However, as reported by Foodable Network, Amazon’s Whole Foods is already taking a bite out of the restaurant business. Then there are Amazon’s new Amazon Go casher-less stores, which have become very popular during the week during lunchtime hours due to its grab-and-go options.

In The Barron Report episode below, Host Paul Barron outlines some of the power players including Amazon and Uber Eats that are taking away customers and revenue from restaurants.  

Is Fast Casual Dying? Emerging Brands Tell a Different Story

Despite major losses on the Nasdaq for national fast casual brands like Chipotle, Panera Bread, and Noodles & Company, fast casual emerging brands like Freshii, Corelife Eatery, and Sweetgreen are growing.

Based on Top 150 Emerging Brands Data

Based on Top 150 Emerging Brands Data

Foodable defines an emerging brand as a concept that finds itself at the beginning stages of development, whether it’s just launching or it’s working through the minutiae of scaling and expansion.

According to Foodable Labs, restaurant traffic overall has gone down 6.8 percent year over year, based on social media mentions of the top 1,000 chains, while emerging fast casual brands have seen an 8.2 percent increase in restaurant traffic.

Nasdaq claims that fast casual is a dying trend, but we believe this is just a shift in the trend.
Emerging brands can’t stay an emerging brand forever, eventually, they begin to scale and gain notoriety across the nation, if done right. National brands like Chipotle are simply seeing natural market forces.

They face greater competition as they continue to expand, as well as more challenges. Whereas an emerging brand is just beginning to build brand recognition. Emerging brands are more nimble when they’re smaller and face less scrutiny.

To learn more about what that exactly means for restaurants, be sure to watch the video above and download the Top 150 Emerging Brands Report.