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Should Darden Restaurants Be a $90 Stock?

By Anders Bylund – May 19, 2020 at 4:00PM

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Olive Garden's parent company got an upgrade and a bullish target price from one analyst on Tuesday.

Darden Restaurants (DRI 5.43%) was the subject of a bullish analyst report on Tuesday morning. The parent company of several popular restaurant chains received a buy rating from analyst firm MKM Partners. MKM analyst Brett Levy also pegged Darden's target price at $90 per share. That's up from an earlier projection of $62 per share and 19% above Monday's closing price.

MKM's upgrade

Levy based this upgrade on a fresh business update from Darden. The company reported a 49% year-over-year decline in same-store sales for the week ending on May 17, up from a 60% drop three weeks earlier. The casual-dining flagships Olive Garden and LongHorn Steakhouse drove this improvement while the company's fine dining restaurants lagged behind.

The analyst was encouraged by these stabilizing trends. Darden is a "best-in-class full service restaurant company" in Levy's view, and he expects the company to gain market share from weaker competitors across the COVID-19 crisis.

A fork and a knife lie crossed on top of several hundred-dollar bills on an orange plate.

Image source: Getty Images.

Darden also noted that its ongoing cash burn has slowed to approximately $10 million per week, down from $20 million per week in April.

The stock rose less than 3% on the news. Darden's share prices have tripled since bottoming out at a multi-year low of $26.15 in March but investors are still aching from a 37% price drop over the last quarter.

Anders Bylund has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Darden Restaurants, Inc. Stock Quote
Darden Restaurants, Inc.
DRI
$132.22 (5.43%) $6.81

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