Cheesecake Factory Downgraded to Neutral by Goldman Sachs

Goldman Sachs downgraded Cheesecake Factory to Neutral from Buy with a price target of $67, citing valuation after the stock's recent rally. The firm sees strong operational improvements and unit growth, but notes limited upside to consensus views and less pronounced near-term catalysts.

Goldman Sachs has downgraded Cheesecake Factory Inc. (CAKE) from a Buy to a Neutral rating, citing concerns about valuation following the stock's recent rally. The price target was adjusted from $66 to $67 [1]. Despite the downgrade, Goldman Sachs acknowledges the company's strong operational performance and growth in its business units.

The firm highlights that potential positive developments for the company may not be as impactful in the near future. Additionally, the possibility of the stock outperforming current market expectations seems limited according to the firm's analysis. Analysts at Goldman Sachs believe that the stock's recent upward movement has justified a valuation adjustment.

According to Wall Street analysts, the average target price for Cheesecake Factory Inc. is $56.56, with a high estimate of $66.00 and a low estimate of $40.00. The average target price implies a downside of 11.81% from the current price of $64.14. The consensus recommendation from 21 brokerage firms is currently 2.4, indicating an "Outperform" status [1].

GuruFocus estimates the GF Value for Cheesecake Factory Inc. to be $41.32 in one year, suggesting a downside of 35.58% from the current price of $64.14. GF Value is GuruFocus' estimate of the fair value that the stock should be traded at, calculated based on historical multiples and future performance estimates [1].

In the first quarter of fiscal 2025, Cheesecake Factory Inc. reported strong financial results. Total revenue reached $927 million, exceeding guidance, and adjusted net income margin was 4.9%, surpassing expectations. The company also achieved a 27% year-over-year increase in adjusted earnings per share [2].

Cheesecake Factory Inc. opened eight new restaurants in the first quarter of 2025, including three North Italia, three Flower Child, and two FRC restaurants. The company plans to open up to 25 new restaurants in 2025, indicating robust expansion efforts. Despite these positive developments, the company faces challenges such as potential impacts from tariffs and a less robust macroeconomic environment, which could affect revenue projections for the remainder of the year [2].

The Cheesecake Factory Inc. stock has been performing well, but the recent rally has led to concerns about valuation. Goldman Sachs' downgrade reflects a cautious stance on the stock's potential for near-term catalysts and upside. Investors should closely monitor the company's earnings reports and other developments to gauge the stock's performance in the coming quarters.

References:

[1] https://www.gurufocus.com/news/2968481/cheesecake-factory-cake-downgraded-by-goldman-sachs-on-valuation-concerns-cake-stock-news
[2] https://www.stocktitan.net/news/CAKE/