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Loop Capital cuts Cracker Barrel stock target by $22, maintains hold

EditorAhmed Abdulazez Abdulkadir
Published 05/20/2024, 09:13 AM

On Monday, Loop Capital revised its price target for Cracker Barrel (NASDAQ:CBRL) Old Country Store, Inc. (NASDAQ:CBRL), decreasing it to $50 from the previous $72, while retaining a Hold rating on the stock. The adjustment follows Cracker Barrel's announcement last week of a new strategic transformation plan aimed at revitalizing the brand and regaining customer traffic that had diminished over recent years.

The company's transformation strategy includes a series of initiatives, one of which is the testing of remodel prototypes. Cracker Barrel anticipates completing between 25 and 30 store remodels during the fiscal year 2025.

To support this initiative, the management has projected a significant rise in capital expenditure, from $120-130 million in the fiscal year 2024 to $160-180 million in the fiscal year 2025, with further increases to $180-200 million in the fiscal year 2026 and $260-300 million in the fiscal year 2027.

As part of the strategic changes, Cracker Barrel also plans to reduce its dividend payout, a move that is expected to support the increased spending on the remodeling efforts. Loop Capital's decision to maintain a Hold rating reflects a cautious stance on the stock amidst these developments.

The firm's revised price target of $50 is based on approximately 6.5 times their adjusted forecast for the company's enterprise value to earnings before interest, taxes, depreciation, and amortization (EV/EBITDA) for the fiscal year 2024.

InvestingPro Insights

In light of Cracker Barrel's recent strategic transformation announcement, the InvestingPro data provides a deeper financial perspective on the company. As of the last twelve months leading up to Q2 2024, Cracker Barrel's market capitalization stands at a modest $1.09 billion, with a price-to-earnings (P/E) ratio of 13.19, suggesting a potentially reasonable valuation compared to industry peers. The company's revenue growth has been tepid, with a slight increase of 1.02%, reflecting the challenges in regaining customer traffic.

Despite these challenges, Cracker Barrel boasts a high dividend yield of 10.62%, significantly rewarding shareholders. This aligns with the company's history of maintaining dividend payments for 43 consecutive years, a testament to its commitment to returning value to investors. However, it's important to note that the dividend payout is expected to be reduced as the company reallocates funds towards its remodeling initiatives.

InvestingPro Tips highlight that Cracker Barrel's stock is currently trading near its 52-week low and the Relative Strength Index (RSI) suggests the stock is in oversold territory. This could indicate a potential entry point for investors who believe in the long-term value of the company's transformation plan. Additionally, while the stock has taken a significant hit over the last week and month, analysts predict the company will be profitable this year, which could provide some reassurance amidst the recent price declines.

For investors seeking more in-depth analysis and additional insights, InvestingPro offers a range of tips, including seven more related to Cracker Barrel's financial health and stock performance. To explore these further, consider subscribing to InvestingPro, and don't forget to use the coupon code PRONEWS24 for an additional 10% off a yearly or biyearly Pro and Pro+ subscription.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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