Wall Street analysts were generally lukewarm on Bojangles’ stock Tuesday, as they began issuing ratings for the Charlotte restaurant chain that went public last month. The company’s stock closed down more than 7 percent – its biggest one-day drop.
Bojangles’ started trading May 8 on the Nasdaq exchange under the symbol “BOJA.” The stock’s price was set at $19, and by the close of the bell that day, it was up 25 percent.
Now, 16 trading days later, analysts seem guarded about the restaurant chain’s stock, with seven firms initiating hold or neutral ratings, and three initiating buys. The shares closed down 7.5 percent Tuesday at $25.91.
The average price target – an estimated value the stock could reach over the next year – is $28.63, Bloomberg reported Tuesday.
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Chris O’Cull, an equity research analyst at KeyBanc Capital Markets – which gave the stock a “buy” rating – said some of the other analysts likely thought the stock was already fully valued. He anticipates it will recover, though.
“Probably there were more hold ratings than the Street was expecting,” O’Cull said of the stock’s decline.
Goldman Sachs, Piper Jaffray, Barclays, RBC Capital Markets, SunTrust Robinson Humphrey, Stephens Inc., Wells Fargo and Bank of America all initiated or continued coverage with neutral ratings.
Of those with neutral ratings, Goldman had the lowest price target at $23 and Bank of America had the highest at $30, Bloomberg reported.
“BOJA has a strong ‘core’ Carolina presence, but recognition and therefore financial performance in ‘adjacent’ markets ... are more challenging,” Barclays analysts wrote in a research note.
Jefferies, William Blair and KeyBanc Capital Markets were the most bullish, meaning they’re likely to expect the stock price to rise over time. All had buy ratings and price targets around $32, though William Blair did not give a target in its research note to clients, Bloomberg reported.
Jeffries cited Bojangles’ potential for growth outside the Southeast as part of the reason for its bullish outlook, but also said the chain hasn’t yet proven itself outside its core customer regions.
William Blair pointed to the restaurant chain’s focus on chicken and breakfast, as well as its ambitious expansion plans, as reasons for its optimistic outlook.
Bank of America, Wells Fargo and Jefferies were the investment banks that led Bojangles’ IPO.
Bojangles’ operates 622 restaurants, but in its IPO filing in April, the company said it wants to expand the number of restaurants by 7 to 8 percent a year. That would add up to 50 stores in the next year, and more each year after that. The company intends to focus first on its existing footprint – 10 states plus the District of Columbia – and won’t be moving into any new states for at least five years, CEO Clifton Rutledge told the Observer last month.
Bojangles’, known for its chicken and biscuits, has a cult-like following, especially in the Southeast, where about two-thirds of its restaurants are located. The company’s sales have been increasing: revenue is up 24 percent from 2012, totaling $407 million in fiscal 2014.
Bloomberg News contributed to this story.