JPMorgan Downgrades Brinker International to Neutral

Investing.com — JPMorgan has cut its rating on Brinker International (NYSE:EAT) shares from Overweight to Neutral, citing that the stock is now "fully valued" following a recent rally.

The restaurant chain operator reported a 14.1% growth in comparable sales for the first quarter, with a 6.5% increase in customer traffic. This positive trend follows a 14.8% growth in comparable sales in the fourth quarter of 2024.

Brinker's success is largely credited to the promotional campaign "3 for me" and the introduction of the Big Smasher combo priced at $10.99.

Since Kevin Hochman took over as CEO on June 6, 2022, at a stock price of $30, Brinker has experienced a significant turnaround, reaching $104.

Hochman's strategy emphasizes Brinker's core offerings, including the popular Triple Dipper, which now accounts for 11% of sales. However, JPMorgan predicts comparable sales growth will decelerate to 5% in the fourth quarter of 2025, normalizing to 2-2.5% in subsequent years.

The Wall Street firm has set fiscal 2025 estimates for Brinker above the company’s guidance, projecting $4.84 billion in revenues and $6.00 in earnings per share (EPS). Continued EPS growth is anticipated for fiscal 2026 and 2027.

Despite the strong business momentum, JPMorgan views Brinker's stock valuation as “fully stretched,” setting a price target of $100.

In a separate report, analysts at BMO Capital Markets also downgraded EAT shares to Market Perform, indicating the shares now better reflect the strength of Chili's turnaround.

BMO analyst Andrew Strelzik mentioned, “Shares have appreciated over 200% in the last 12 months, exceeding our casual dining coverage and more than 5x the S&P 500 increase.”

He added, “While we materially raise estimates and increase our target to $105, we assign a 9.5x EV/EBITDA multiple on our out-year (FY26) EBITDA to account for potential additional earnings upside and are hesitant to push our target multiple further."