Yum Brands is well-positioned to navigate the murky road ahead for restaurant stocks even as a slowdown in consumer spending looms, according to Goldman Sachs. Analyst Jared Garber upgraded shares of the Pizza Hut and Taco Bell owner to buy. The analyst also hiked his price target on the stock to $135 per share, implying upside of 14% from Friday’s close of $118.15. “We upgrade YUM to Buy from Sell as the company’s highly-franchised model provides relative insulation from macro-volatility, while our analysis of market-by-market growth across YUM’s brands suggests the company can drive unit growth ahead of its LT algo (4-5%) for the next 2 years,” he said. Much of Yum’s success is driven by its unit growth algorithm, which Garber believes is a “sticky and sustainable” driver of sales growth. Given this strength, Goldman upped its estimates for 2022, 2023 and 2024, especially as global markets improve. On the global front, Garber believes Yum is poised to benefit from reopenings in China and the international expansion of Taco Bell. Meanwhile, the company’s ongoing push to improve its digital ecosystem, including apps, should pose long-term benefits. “Over the last 3 years, YUM has also acquired several digital/technology companies that are helping to drive both in-restaurant operational improvements as well as more targeted marketing optionality,” he said. “We view these investments as a winning formula for continued unit growth and SSS growth, while helping to improve franchisee operations and profits, and helping to drive YUM’s platform business share-growth opportunity.” Shares of Yum have dropped roughly 15% this year but could rally another 14.2% from Friday’s close given Goldman’s revised $135 price target. In the same note, Goldman downgraded shares of Brinker International — which have plummeted 37.2% this year — to neutral. — CNBC’s Michael Bloom contributed reporting
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