On Wednesday, UBS adjusted its outlook on Cracker Barrel (NASDAQ:CBRL), reducing the price target on the company's shares to $75 from the previous $82 while maintaining a Neutral rating.
The adjustment follows Cracker Barrel's second-quarter financial results and commentary, which continued to show challenged traffic patterns and ongoing margin difficulties. However, the company's strategic plans aimed at bolstering growth and profitability were also noted.
The company's recent marketing efforts and the implementation of a loyalty platform have shown signs of potential improvement in customer traffic, which could lead to a stronger top-line performance if the initiatives are executed effectively. Cracker Barrel has updated its guidance, now expecting revenue to be between $3.5 and $3.6 billion, although operating income forecasts have been revised down to $125-135 million.
UBS highlighted Cracker Barrel's focus on strategic transformation, which is centered on three core objectives: increasing brand relevance, improving food and customer experience, and enhancing profitability.
Despite the current valuation being considered reasonable at approximately 13 times the consensus FY25 EPS, UBS expressed caution, noting that margin pressures and broader economic factors could constrain near-term stock performance.
The firm suggested that Cracker Barrel needs to demonstrate progress in its strategic initiatives and improving profitability before its shares can experience a significant revaluation.
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