By Mark Kalinowski
Published on April 3, 2019 at 12:00 AM
We initiate coverage of Denny’s (DENN) with a Neutral rating. At present, we do not view the multiple opportunities and positives of the company (and its stock) as enough to overcome the concerns and risks that we have. Amongst those risks are: (1) the possibility that sell-side consensus EPS for 2019 is too high as of this writing, (2) a likely lack of possible upside to current Street expectations as regards U.S. same-store sales, and (3) some fast-expanding family-dining chain competition. As with each of our Neutral-rated stocks, our target price for DENN is NA (not applicable). We note the following:
NEW YORK CITY NON-DEAL ROADSHOW PLANNED FOR THURSDAY, JUNE 20TH
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By Mark Kalinowski
Published on February 5, 2019 at 12:00 AM
We downgrade the shares of Papa John’s (PZZA) to Neutral (from Buy). Our ratings change reflects the following: (1) our original upgrade to Buy reflected the possibility of Papa John’s being acquired; that possibility seems resolved with it unlikely to happen (albeit with the silver lining of yesterday’s news of Starboard’s $200 million strategic investment, which helped the shares up by about +9% yesterday), (2) our view that the business was getting “less bad” in Q4 and likely to show further improvement in early 2019, which is undercut by the news yesterday that North American systemwide same-store sales declined by -8.1% in Q4 2018 and by -10.5% in January 2019 (technically, December 31, 2018 through January 31, 2019), (3) our evolving view on the likelihood of meaningful refranchising, which we cannot rule out in the long run — but which appears to be getting less likely in the short- and medium-term given the recent business results, and (4) PZZA shares’ +5.4% year-todate performance even in the face of poor fundamentals — sometimes it’s best to take a gain when a gain can be had, even if it’s not what we had hoped for when we originally upgraded PZZA to Buy. We note the following:
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By Mark Kalinowski
Published on November 5, 2018 at 12:00 AM
Although our Buy rating on Papa John’s (PZZA) is mostly predicated on the possibility that the company is acquired by a possible suitor — for example, on October 30th, Reuters reported that “Bain Capital and CVC Capital Partners are among the private equity firms competing to acquire Papa John’s” — there are multiple other paths to meaningful upside for the stock. We write this brief report to suggest one other path to meaningful upside, if an acquisition of PZZA fails to materialize. (We still believe the odds of an acquisition over the next 12 months or so are greater than 50/50.)
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