Darden Restaurants (DRI) is piquing investor interest now that life is finally returning to at least a semblance of normal. DRI was trading at $133 in late March. The stock shot up to $148 in the final week of the month and has since been trading between $140 and $146.
Look back six months, and you will find DRI was priced at a lowly $90 in late October of 2020. DRI has slowly but surely moved upward in the months since. In other words, it is clear that investors anticipate consumers will be spending at DRI restaurants as the economy gradually reopens.
Will DRI continue to move even higher now that people are returning to life as usual? Or have consumers changed their ways to the extent that they will cook on their own at home instead of relying on DRI restaurants for hot eats and cool treats? We answer these questions below.
DRI Points of Note
DRI was priced around $60 back in April of 2020 when the pandemic was beginning. Take a look at DRI’s one-year chart, and you will be more than impressed. Investors gradually regained confidence in this restaurant powerhouse, adding more money to their DRI holdings with each passing month.
The only question is whether investors who have been sitting on the sidelines have missed out on DRI’s return to prominence. The fact that DRI’s forward P/E ratio has jumped up to 36.91 is slightly concerning. However, this elevated forward P/E ratio is somewhat justified considering the fact that DRI’s restaurant business is likely to boom following the Biden administration’s economic stimulus checks and the gradual reopening of society.
Though some particularly self-reliant individuals who have wholeheartedly embraced the DIY (do it yourself) ethos during the pandemic might continue to make their own meals at home throughout the months ahead, the average person is chomping at the bit to devour delicious food whipped up in a flash at DRI restaurants.
Examples of DRI restaurants include Eddie V’s, Olive Garden, LongHorn Steakhouse, Yard House, Seasons 52, The Capital Grille, Red Lobster, and Cheddar’s Scratch Kitchen. These restaurants are operated in the United States and Canada. Though the United States is rapidly vaccinating its population, Canada is lagging behind. Canada’s slow vaccination pace is certainly something for investors to monitor in the context of a potential DRI investment.
DRI According to Analysts
Analysts are bullish on DRI, setting an average target price of $156.04 for the stock. If DRI hits this target price, it would have popped by nearly 9%. The highest target price for the stock is $175, while the lowest target price is $135.
Of the 30 analysts who have issued recommendations for DRI, six consider it a Strong Buy, and fourteen consider it a Buy.
DRI POWR Ratings
DRI has a B POWR Rating meaning it is a Buy. The stock has an A grade in the Sentiment component, a B grade in the Growth component, and a C grade in the Quality component. We also grade DRI based on Stability, Value, and Momentum. You can find those grades by clicking here.
Of the 46 publicly traded companies in the Restaurants industry, DRI is ranked 18th. If you find other top stocks in this industry, click here.
Is DRI a Buy?
Yes. DRI is a Buy. Investors can invest in this stock with confidence as its POWR Rating Sentiment component grades out as an A. Its growth component of B is also solid. The icing on the cake is DRI’s top-20 ranking within the Restaurants industry. DRI has the potential to soar as people return to traditional sit-down dining in restaurants throughout North America.
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DRI shares rose $0.60 (+0.42%) in premarket trading Thursday. Year-to-date, DRI has gained 21.57%, versus a 11.62% rise in the benchmark S&P 500 index during the same period.
About the Author: Patrick Ryan
Patrick Ryan has more than a dozen years of investing experience with a focus on information technology, consumer and entertainment sectors. In addition to working for StockNews, Patrick has also written for Wealth Authority and Fallon Wealth Management. More...
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