Yum Brands is well-positioned to navigate the murky path ahead for restaurant stocks even as consumer spending is dwindling, according to Goldman Sachs. Analyst Jared Garber has upgraded shares of Pizza Hut and Taco Bell owners to buy. The analyst also raised his stock price target to $135 per share, implying a 14% gain from Friday’s close of $118.15. “We upgraded YUM to Buy from Sell because the company’s highly franchised model provides relative isolation from macro volatility, while our analysis of growth by market on YUM’s brands shows that the company can drive unit growth ahead of the LT term (4-5%) over the next 2 years,” he said. Much of Yum’s success is driven by its unit growth algorithm, which Garber believes is a “stable and sustained” sales growth driver. Given this strength, Goldman has increased its estimates for 2022, 2023 and 2024, especially as global markets improve. Globally, Garber believes Yum is poised to benefit from the reopening in China and Taco Bell’s international expansion. Meanwhile, the company’s ongoing efforts to improve the digital ecosystem, including apps, will pay off in the long run. “Over the past 3 years, YUM has also acquired a number of digital/tech companies that are helping to drive innovation in restaurant operations as well as a more targeted marketing option,” he said. “We see these investments as a winning formula for continued unit and SSS growth, while helping to improve franchisee operations and profitability, and helping drive growth opportunities.” share business on YUM’s platform.” Yum’s stock is down about 15% this year but could gain another 14.2% from Friday’s close with Goldman’s revised $135 price target. In the same note, Goldman downgraded the stock of Brinker International – which has plummeted 37.2% this year – to neutral. – CNBC’s Michael Bloom contributed reporting
