Is Restaurant Brands a Buy on the Dip?

Restaurant Brands International Inc (TSX:QSR)(NYSE:QSR) is down 8% in the past week as one of its key brands, Tim Hortons, is facing a lawsuit from a disgruntled franchisee that says the franchisor has failed to meet its obligations. This is not the first time we’ve seen this with Restaurant Brands, as a group of franchisees, the Great White North Franchisee Association, earlier this year accused the company of increasing costs and making it more difficult for franchisees to stay in business.

The sell-off in share price has resulted in the stock going into oversold territory. With a Relative Strength Index (RSI) of less than 29, this suggests that the share price might be due for a reversal. When the RSI falls below 30 that tells investors there has been an excess of selling.

As mentioned, having disputes with its franchisees is nothing new for Restaurant Brands and it hasn’t been enough to adversely affect the stock. Year-to-date returns are still north of 20% even with this latest setback.

Even if Restaurant Brands loses some franchisees, the popular Tim Hortons brand will certainly find others that are more than willing to run the iconic Canadian coffee shop. Negative press might send a stock down in price, but unless there is a significant problem that will impact the company’s operations, the stock is likely to recover.

This could be a great opportunity for investors to buy on the dip and take advantage of a rare opportunity where the stock has seen a big sell-off.