Jefferies: Jack In The Box's Qdoba Unit's Value Not Priced In

Jack in the Box Inc.'s (NASDAQ: JACK) Qdoba Mexican Grill unit will increase same-store sales by up to 10 percent in coming quarters and its growth prospects aren't reflected in the company's shares, an analyst said Thursday.

San Diego-based Jack in the Box took a breather Thursday after hitting an all-time high earlier in the week on its third-quarter earnings and outlook.

After rising nearly 50 percent year-to-date, Jack in the Box was nearly unchanged recently at $75.01 per share.

"We'd be buyers," Jefferies' Alexander Slagle, adding that he expects the company's same-store sales and earnings growth to continue.

Slagle raised his price target more than 12 percent Thursday to $80.

The company recently posted a 29 percent decline in fiscal fourth-quarter net income of $16.2 million, or $0.40 per share. But adjusted income increased 20 percent to $0.54, beating expectations by a penny.

Qdoba represented about $82 million of the roughly $260 million in sales from company operated restaurants during the fourth quarter.

Same-store sales for Qdoba are expected to grow between 8 percent and 10 percent in the first quarter, while comps for Jack in the Box restaurants are expected to increase by 1 percent to 2 percent.

"Qdoba can represent a much more meaningful portion of total growth in two-to-three years," Slagle said.

Wedbush's Nick Setyan maintained an Outperform rating and raised his target slightly to $91.

"Qdoba is now positioned as a legitimate growth company," Setyan said, adding that the Wall Street earnings consensus for Jack in the Box is "poised for an upward revision."

Wunderlich's Robert M. Derrington called recent same-store sales growth "impressive" and reiterated a Buy rating on the company, putting his $77 target under review.