Wall Street Favorites: 3 Restaurant Stocks With Strong Buy Ratings for May 2024


  • Get a full serving of returns with these three restaurant stocks.
  • Chipotle (CMG): The company is still on pace to open 285 to 315 new restaurants this year.
  • Wingstop (WING): The company has more than 2,000 restaurant chains.
  • Texas Roadhouse (TXRH): This stock offers growth at a reasonable price.
restaurant stocks to buy - Wall Street Favorites: 3 Restaurant Stocks With Strong Buy Ratings for May 2024

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Buying food at a restaurant is more convenient than making it yourself. You can also find restaurants with tasty and healthy options. These dynamics have resulted in billion-dollar corporations emerging as household names.

However, some restaurants have been facing pushback for their higher prices. Some people are opting to prepare meals at home to save money, and the trend can continue as the cost of living remains elevated. Luckily, some restaurant stocks to buy are still performing well, including these top picks.

Chipotle (CMG)

a pedestrian walks past a Chipotle
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Chipotle (NYSE:CMG) has received plenty of love on Wall Street. The stock has 18 Buy ratings and 8 Hold ratings from analysts. The stock has received several price target hikes, including a $3,600 target, implying a 14% upside.

The Mexican restaurant chain has been outperforming many stocks. It’s up 38% year-to-date and has surged 339% over the past five years. A recently announced 50-for-1 stock split has brought additional attention to the company’s stock. 

Chipotle reported a solid first quarter, while other restaurant firms warned about pricing pressure hurting their growth. The restaurant firm reported 14.1% year-over-year (YOY) revenue growth and 23.9% YOY growth in its diluted EPS. Chipotle opened 47 new restaurants and is on track to open 285 to 315 restaurants in 2024.

Many consumers buy food at Chipotle because it is a healthier alternative to other fast food restaurants. Healthy food comes with a higher price, and consumers have stuck around despite the price hikes.

Wingstop (WING)

A close-up of a Wingstop (WING) sign on a green circle background.
Source: Ken Wolter / Shutterstock.com

If you like Chipotle, you’ll probably like Wingstop (NASDAQ:WING) too. This stock comes with a lofty valuation but delivers high revenue and earnings growth. It’s received several Buy ratings from Wall Street analysts. The highest price target of $461 per share suggests the stock can rally by an additional 18%. 

Wingstop crushed the stock market. It’s up 53% year-to-date and surged 393% over the past five years. Investors continue to load up on the stock due to its impressive financials. System-wide sales increased by 36.8% YOY in Q1 2024. The company also opened 65 new restaurants during the quarter, which was more than Chipotle. Total revenue increased by 34.1% YoY, while net income surged by 83.5% YoY.

These developments point to rapid profit margin expansions and plenty of runway for future growth. The company closed the quarter with 2,279 restaurants, which includes 305 international restaurants.

Texas Roadhouse (TXRH)

An outside and closeup view of a Texas Roadhouse, Inc. (TXRH) sign
Source: Jonathan Weiss / Shutterstock.com

Texas Roadhouse (NASDAQ:TXRH) won plenty of support on Wall Street with 10 Buy ratings and 14 Hold ratings. The highest price target of $190 per share suggests a 13% gain is on the way.

Like the two restaurant stocks that came before it, Texas Roadhouse has outperformed the stock market. It’s up 39% year-to-date and gained 210% over the past five years. The southwestern steakhouse chain trades at a 34 P/E ratio and offers a 1.34% yield. The valuation can attract value investors scared off by the valuations of the other two restaurant stocks. It even has a good dividend growth rate. Texas Roadhouse recently hiked its quarterly dividend from $0.55 to $0.61 per share. That’s a 10.9% YOY improvement.

Texas Roadhouse also has financials worth your attention. Revenue increased by 12.5% YOY, while net income jumped by 31.0% YOY in Q1 2024. The company opened nine company restaurants and three franchise restaurants in the quarter. Texas Roadhouse has 753 total restaurants across its brands. 

On the date of publication, Marc Guberti did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Marc Guberti is a finance freelance writer at InvestorPlace.com who hosts the Breakthrough Success Podcast. He has contributed to several publications, including the U.S. News & World Report, Benzinga, and Joy Wallet.

Article printed from InvestorPlace Media, https://investorplace.com/2024/05/wall-street-favorites-3-restaurant-stocks-with-strong-buy-ratings-for-may-2024/.

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