On Wednesday, Citi analyst Lynne Collier adjusted the price target for Darden Restaurants (NYSE:DRI), the parent company of Olive Garden and other chains, to $206 from the previous $209 while maintaining a Buy rating on the stock.
The $20.1 billion restaurant giant, currently trading near its 52-week high of $177.67, shows mixed signals according to InvestingPro analysis. The revision reflects concerns about ongoing softness in same-store sales (SSS) at Olive Garden (OG), but also considers potential positive developments in the company's future.
Collier noted that Olive Garden's SSS challenges could continue to be a focal point for bears, who might argue for more structural issues with the brand, such as the convenience of home meal replacements. The company's strong dividend track record, having maintained payments for 30 consecutive years with recent growth of 6.87%, suggests underlying financial stability.
Despite these challenges, Collier pointed to two factors that could counterbalance the negative outlook as the company approaches the second half of fiscal year 2025 (2H25).
Firstly, Collier highlighted that being misaligned with one-year SSS inflections can be risky, especially with Darden planning two Limited Time Offers (LTOs) and expanding its partnership with Uber (NYSE:UBER) Eats. The Uber Eats delivery service, which is currently available in 100 stores, is expected to be fully rolled out by the end of the fiscal year.
Secondly, the potential for discussions about the Uber Eats collaboration during Darden's earnings call may shift investor focus. This shift could lead to a reevaluation of the company's prospects for the second half of fiscal year 2025 and even the implications for fiscal year 2026.
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