Piper Jaffray 'Urging Investors to Buy' Sonic (SONC) Following Channel Checks

Piper Jaffray reiterates an Overweight rating and $42.00 price target in Sonic (NASDAQ: SONC) after raising 2H15 earnings estimates to $0.36 per share. Analyst Nicole Regan is "urging investors to buy SONC shares", believing that the valuation methodology best reflects the business on a sum of parts basis.

Regan commented on SONC, saying, "We have increased our 2H15 earnings expectations, with increased conviction in our forward same-store sales estimates. For the 3Q15 period, we now project $0.36 per share, up $0.01 per share (refined interest expense projection). This is also based partially on our a +5.0% system-wide same-store sales estimate, which is driven by our assumption for equal parts +2.5% price/traffic. We are maintaining our Overweight rating and $42 price target, based on 15x our FY16E EV/EBITDA estimate. Our valuation methodology best reflects the business and its respective drivers on a sum of parts basis including $8/share value related to the company-owned EBITDA stream (= to 8x) and $34/share related to the franchise royalty stream (= to 15x). For reference, we note that each 1x turn in multiple equates to approximately $4/share."

For an analyst ratings summary and ratings history on Sonic click here. For more ratings news on Sonic click here.

Shares of Sonic closed at $30.99 yesterday.

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