BTIG Initiates Coverage Of 15 Restaurant Stocks; Prefers Chipotle, Starbucks, B-Dubs Over McDonald's, Yum & Others

In a report issued Wednesday, BTIG analysts Peter Saleh and Ben Parente initiated coverage of the restaurants industry, across the casual dining, fast casual and quick service segments.

Buy Rated Stocks

Their Buy rated stocks are:

• Brinker International, Inc. (NYSE: EAT), $66 Price Target
• Buffalo Wild Wings (NASDAQ: BWLD), $212 Price Target
• Darden Restaurants, Inc. (NYSE: DRI), $82 Price Target
• Chipotle Mexican Grill, Inc. (NYSE: CMG), $779 Price Target
• Domino's Pizza, Inc. (NYSE: DPZ), $139 Price Target
• Jack in the Box Inc. (NASDAQ: JACK), $105 Price Target
• Papa John's Int'l, Inc. (NASDAQ: PZZA), $91 Price Target
• Starbucks Corporation (NASDAQ: SBUX), $64 Price Target

Neutral Rated Stocks

Neutral rated stocks include:

• Dunkin Brands Group Inc (NASDAQ: DNKN)
• McDonald's Corporation (NYSE: MCD)
• Panera Bread Co (NASDAQ: PNRA)
• Red Robin Gourmet Burgers, Inc. (NASDAQ: RRGB)
• Texas Roadhouse Inc (NASDAQ: TXRH)
• Cheesecake Factory Inc (NASDAQ: CAKE)
• Yum! Brands, Inc. (NYSE: YUM)

Industry Overview

The analysts highlight a four key points for restaurant industry investors.

1) They expect companies that best leverage digital platforms to continue to capture market share from smaller or independent companies. Among the leaders, they count Domino’s, Papa John's, Dunkin’ Donuts, Brinker, Buffalo Wild Wings and Starbucks.

2) The experts at BTIG expect to see further advances in customer accessibility through digital ordering and delivery over the coming quarters. Once again, Starbucks and Dunkin’ Donuts are in this group, along with Panera and Taco Bell.

3) The firm anticipates a commodity tailwind from falling cheese and butter prices. This should benefit the pizza operators and The Cheesecake Factory. On the other hand, they see beef likely remaining an inflationary pressure.

4) Finally, in the salaries front, surges continue as many states increase minimum wages. “In our view the only recourse restaurant operators have to persistent wage inflation are price increases, implementing technology to reduce labor hours or refranchising restaurants,” the analysts conclude.