Credit Suisse Publishes Top Restaurant Picks for Covid Reopening Play in 300+ Slide Deck

January 25, 2021 8:51 AM EST
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Credit Suisse analyst Lauren Silberman, published her annual review of the restaurant industry including her ~340 slide presentation. This year, the sector is poignant do to the inflection opportunity for chains that emerge as the winners as the economy reopens. The analyst expects 10% to 20% of the industry to close its doors leaving a substantial void to fill for the survivors.

She stated "Our top 2021 picks include Chipotle Mexican Grill (NYSE: CMG) & Papa John's (NASDAQ: PZZA) in limited service, Darden Restaurants (NYSE: DRI) in full service and Sysco Corp. (NYSE: SYY) in food distribution. Investors appear to be long casual dining & food distribution on reopening, but there is growing caution, with top-line optimism somewhat offset by incremental headwinds from food inflation, labor inflation (potential $15 minimum wage and elimination of tip credit) and corporate tax increases. We believe investors are getting more constructive on heavily franchised QSRs, though there is some caution regarding the impact of a strong McDonald's (NYSE: MCD) & the lapping of tough breakfast compares for WEN, as well as mixed confidence in the return to global unit growth algorithms for Restaurant Brands (NYSE: QSR) & Yum! Brands (NYSE: YUM) in 2021. We suspect franchised QSRs could fall into favor as we gain better visibility into the likelihood and timeline of labor reform. The outlook for pizza is still up for debate, though there seems to be growing interest for PZZA and Domino's Pizza (NYSE: DPZ). CMG is a favorite for growth-focused investors, though bears continue to point to margin concerns (& valuation)".



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