Key Takeaways
- Shares of Dine Brands Global, the parent company of Applebee’s and IHOP, fell Friday after receiving a downgrade from a Truist equities analyst.
- The analyst wrote Thursday that his firm’s card data showed Applebee’s sales struggling more than some of its competitors in recent months.
- Applebee’s stock was downgraded by the firm to “hold” from “buy” and its price target cut nearly in half, to $37 from $66.
Dine Brands Global (DIN) stock fell Friday as the owner of Applebee’s and IHOP was downgraded by a Truist Securities analyst to “hold” from “buy” over concerns that Applebee’s sales are slowing even as other chain restaurants have recovered in recent months.
Citing Truist’s credit card-tracking data, analyst Jake Bartlett wrote Thursday that Applebee’s same-store sales appeared to slow in August and September, despite sales-boosting efforts like a chicken wing-related promotion tied to the kickoff of the NFL season last month.
That concerning trend would come as “particularly disappointing,” given that some other chain restaurants have recovered in recent months, Bartlett wrote.
In addition to the downgrade, Dine Brands’ price target was cut by Truist to $37 from $66 previously, closer to the average price target of the six analysts tracked by Visible Alpha of $41.67.
Dine Brands shares dropped by as much as 6% before recovering to trade roughly 1% lower at $33.23 around 2 p.m. ET Friday, The stock has lost nearly 32% of its value since the start of the year.
Slow Sales Could Lead to ‘Hesitancy’ to Open New Locations
While IHOP looks to have outperformed Applebee’s over those months, Bartlett wrote that the data still points to Dine Brands potentially missing sales estimates when it reports earnings for the quarter.
He also wrote that the company could cut spending to mitigate the impact slower-than-expected sales would have on profit margins, and said that “pressured sales” could lead to “increased hesitancy to develop new stores and continued elevated store closures.”
Dine Brands, and Applebee’s specifically, has been among the restaurant brands to close more locations than it has opened in recent quarters as lower discretionary spending and Americans staying in to eat more frequently have hit the industry’s sales.