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Stifel Expects A Recession Within 3 To 9 Months; Bearish On Restaurants

Stifel Expects A Recession Within 3 To 9 Months; Bearish On Restaurants - BJ's Restaurants, Inc. NASDAQ:BJRI, The Cheesecake Factory Incorporated NASDAQ:CAKE

Stifel analyst Paul Westra expects the U.S. economy to fall into a recession within the next three to nine months. In a series of new notes out on Tuesday, he explains why the U.S. economic downturn will be bad news for restaurant stocks.

Westra turned bullish on restaurant stocks for three reasons:

  1. Stifel sees Q2 comp deceleration across every industry sector.
  2. Historically, restaurants have endured at least two years of negative Relative Pricing Power at the beginning of cyclical downturns.
  3. In the year prior to the last three U.S. recessions, restaurant stocks have declined an average of 23 percent.

“Restaurant stocks are monolithic as ~75 percent of names tend to outperform/underperform together throughout a business cycle – such that getting the ‘sector call’ correct represents the vast majority of the potential alpha creation,” Westra explained.

A Few Names

Stifel downgraded several restaurant stocks:

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Disclosure: the author holds no position in the stocks mentioned.

DateFirmActionFromTo
Jul 2016Stifel NicolausDowngradesBuySell
Jun 2016Tigress FinancialUpgradesBuy
Jun 2016Tigress FinancialUpgradesNeutralBuy

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