The U.S.'s 'frugal consumer' era will lead to many casualties in the restaurant chain sector, but The Cheesecake Factory Incorporated (NASDAQ: CAKE) won't be one, which is why I'm reiterating my Buy rating for CAKE, first recommended on June 25, 2009 at a price of $16.30. Don't expect anything spectacular from CAKE in FY2009 -- flattish to slightly higher same store sales, and only a slight increase in revenue, with most likely a net zero increase in restaurants operated. The aforementioned doesn't sound like much, but at the retail/restaurant chain end of the commerce spectrum, survival is the name of the game under these economic conditions, and Cheesecake Factory will.
The reason? The Cheesecake Factory has managed to successfully merge upscale and casual dining, while offering a relatively fresh-food menu with American and international selections. The company has done a better-than-average job at containing costs.
Technically, CAKE's stock chart has dipped below the key 50-day moving average, but that most likely is a constructive correction after a 100% gain earlier this year. View the pull-back as a Buy opportunity. The First Call FY2009/FY2010 EPS estimates for CAKE are 93 cents to $1.05.
Stock Analysis: Cheesecake Factory is a moderate-risk stock. If you've already purchased the company's shares, hold them. If not, consider buying a 25% position in CAKE now; then buy another 25% in one month, if U.S. economic conditions don't worsen substantially. Under any circumstance, don't buy more than 50% of your CAKE position before December 2009. Sell/Stop Loss if you were to buy shares in this company: $9.50.
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Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.
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Reader Comments (Page 1 of 1)
10-14-2009 @ 7:20PM
MyKisa said...
....this time of year my mind turns to the pumpkin cheesecake by those guys
10-15-2009 @ 9:16AM
TimBrinz said...
I love cheesecakes! :D
moj posao