Investing.com -- Raymond James has reshuffled its ratings across the restaurant sector, upgrading Brinker International while cutting its rating on Cheesecake Factory and Darden Restaurants.
Analyst Brian Vaccaro said the changes reflect a year-to-date outperformance in restaurant stocks and improving demand expectations for 2026.
The analyst noted that the outperformance was driven by a January comp rebound, optimism over the first half of this year, and heavy short covering amid “very elevated short interest levels.”
While fourth-quarter results are expected to be mixed, the firm said investors are increasingly focused on current-quarter commentary and 2026 guidance.
Vaccaro upgraded Brinker to Outperform with a $195 price target, citing the potential for a “strong ‘beat and raise’ this quarter.”
He said Chili’s has “successfully lapped much more difficult comparisons” and can sustain solidly positive comps supported by menu innovation and improvements in its general-manager compensation structure. Raymond James also pointed to margin and balance-sheet progress, noting a 6% to 7% free-cash-flow yield that supports buybacks.
By contrast, Cheesecake Factory and Darden were downgraded to Market Perform. Raymond James said both stocks are now “fairly valued” after hitting its price targets.
While 2026 EPS estimates for CAKE were nudged higher on a better cost-of-goods outlook, the firm said further multiple expansion would require “sustained traffic improvement” and a return to positive comps at North Italia.
For Darden, the challenge is valuation, with shares trading near a 20× P/E, the top of their historical range.
Raymond James highlighted Shake Shack and First Watch as its top long ideas for 2026, pointing to strong comp momentum, margin expansion and continued high-return unit growth.
Industrywide, sales softened through the fourth quarter, but Raymond James said improving tax refunds, a stable jobs backdrop and easing year-over-year tourism headwinds could help demand firm in 2026.
