Panera Bread Co (NASDAQ:PNRA) — Shares of this bakery cafes operator rallied Tuesday on an analyst upgrade. This may be what has been needed to spur the next leg up after its recent post-earnings-rally consolidation phase.
Cowen and Company upgraded PNRA stock from “market perform” to “outperform,” raising the target from $172 to $210. It analysts expect to see strong sales growth as a result of store conversions and continued controlled costs.
Last month, Panera announced it will borrow $500 million to increase its share buyback program. And progress is being made on its refranchising program, which it has been discussing with activist hedge fund Luxor Capital Group.
From a technical perspective, we see that while PNRA stock has made a good run since last summer, in the bigger picture, it has just pushed back to the upper line of resistance that has been in place since June 2013. The third time may be the charm, though, and we could see PNRA stock break higher.
On the daily chart below, note that after shares gapped higher on April 16, they settled into a tight consolidation phase. With Tuesday’s nearly 2% rally, PNRA stock scored a marginal breakout of this range, and also marginally pushed above the longer-term resistance line on the above chart.
The gap up in April was constructive, not just because it took the stock to new 2015 highs in one swoop, but also because it quickly filled a previous nasty down gap from February, indicating how well the share buyback program was received by investors.
From here, PNRA stock looks well positioned to move toward the next obvious upside target of $200 over the next few weeks or months.
