UPDATE: Texas Roadhouse (TXRH) PT Raised to $87 at Morgan Stanley As Rebound Continues
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Morgan Stanley analyst John Glass raised the price target on Texas Roadhouse (NASDAQ: TXRH) to $87.00 (from $80.00) noting that January and QTD SSS of -0.3%/-2.0% have materially improved from December levels of -18.2%. Restrictions eased with essentially all restaurants open with some dine-in at the beginning of 4Q, dropping to 82% by the end of the quarter and bouncing back to ~98%. Numbers QTD were negatively impacted by Valentine's Day/weather (~1-1.3% impact) but AWS have improved from ~$92k in 4Q to ~$105k QTD with to-go sales actually increasing as customers got more comfortable ordering from the off-premise channel (~23% of total sales in 4Q vs ~25% QTD).
The analyst reiterated the Equalweight rating, stating "4Q top & bottom line miss will likely be taken in stride, in our view, as sales volumes (in comps and absolute AUV terms) improved substantially in the QTD 21 period. Like other CDRs, strong to go sales (now ~25% of sales) were a key contributor, and are largely maintained even in select stores that are largely free of dine in capacity restrictions, pointing to the likelihood that TXRH will likely be first to see average unit volumes above prior peaks. The outlook for margins - a key debate across all casual diners - was mixed. FY21 restaurant margins should fall in the 15-16% range despite seeing volume that are near 19 levels (when RLM was mid 17%+), driven lower by higher take out mix (lower check, alcohol mix; impact should normalize as higher ticket/margin dine in business is fully restored), commodity inflation of 3%, some expected labor pressures (state level mandates, and some idiosyncratic reasons) and transient, but still present Covid related costs".
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