Cheesecake Factory (NASDAQ:CAKE) watched its shares slide Tuesday after being downgraded by Citi to neutral from buy, which said shares are near its price target. Cheesecake was also downgraded to hold by Gordon Haskett.
As well, Citi took its rating to Neutral from Buy.
The bank’s analysts cited store-level profit growth and margin recovery concerns as key factors augmenting their formerly bullish thesis. Additionally, an over 25% jump for the California-based restaurant chain shares have left them fully valued, in the team’s view.
“We expect CAKE to post solid 4Q/1QTD results (ex-weather) on elevated pricing but worry that ongoing inflation creep and no incremental plans to attack the cost structure will continue to translate into choppy store-level profit growth over time,” the team explained. We can outline a path to greater multiple expansion over time but have lower confidence in this occurring over the [next 12 months].”
Citi maintained its $39 price target despite the rating change
The restaurant chain was in the news just before Christmas with a shakeup in its board of directors, with the appointment of Adam S. Gordon as an independent director in place of Paul D. Ginsberg.
Gordon currently serves as a managing director of Gordon Property Group, a real estate management and development company. In this role, he is in charge of marketing and strategic relationships for commercial buildings and other properties. Mr. Gordon also serves as President of ASG Global Entertainment, a production and marketing company he founded.
Shares of Cheesecake Factory fell $1.48, or 3.8%, to $37.04 in early trading on Tuesday.
