Why Brinker International, Inc. Shares Slipped
While Fools should generally take the opinion of Wall Street with a grain of salt, it's not a bad idea to take a closer look at particularly stock-shaking upgrades and downgrades -- just in case their reasoning behind the call makes sense.
What: Shares of Brinker International fell 2% this morning after Wunderlich Securities downgraded the restaurant operator from buy to hold.
So what: Along with the downgrade, analyst Robert Derrington lowered his price target to $52 (from $56), representing just 9% worth of upside to yesterday's close. So while contrarian traders might be attracted to Brinker's price weakness in recent months, Derrington's call could reflect a sense on Wall Street that industry headwinds are just too strong to trigger a significant rebound.
Now what: According to Wunderlich, Brinker's risk/reward trade-off isn't too appealing at this point. "While we believe management has distinguished its business model as one of the more efficient within the industry, weak consumer spending and intensifying competition from struggling national competitors adds the risk of siphoning sales from Brinker's more healthy brands, and adding to creeping pressure from commodities and wage rates," said Derrington. "We have lowered our blended-SSS for Q4F14 (Jun) to 1.3% from 1.9% and EPS to $0.87 from $0.89; trimmed our FY15 SSS to 1.3% from 1.5%, and EPS to $3.12 from $3.20." When you couple that downbeat view with Brinker's still-hefty debt load and near-20 P/E, it's tough to disagree with Wunderlich's cautious stance.
Warren Buffett: This new technology is a "real threat"
At the recent Berkshire Hathaway annual meeting, Warren Buffett admitted this emerging technology is threatening his biggest cash-cow. While Buffett shakes in his billionaire-boots, only a few investors are embracing this new market which experts say will be worth over $2 trillion. Find out how you can cash in on this technology before the crowd catches on, by jumping onto one company that could get you the biggest piece of the action. Click here to access a FREE investor alert on the company we're calling the "brains behind" the technology.
The article Why Brinker International, Inc. Shares Slipped originally appeared on Fool.com.Brian Pacampara has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
Copyright © 1995 - 2014 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.