UBS analysts have initiated coverage of Dine Brands Global Inc (DIN) with a ‘Buy’ rating and a 12-month target price of $68 per share.
Dine Brands, which owns the “category leaders” Applebee's and International House of Pancakes (IHOP) restaurant chains, has scale and a heavily franchised business model that provides unique free cash flow (FCF) stability within the casual dining sector, they noted.
“We think stabilization of Applebee's same store sales growth and a path to positive net unit growth will serve as catalysts for shares in the next 12 months,” the analysts wrote.
They also expect the Dine Brands franchised model to be rewarded over time given its strong FCF generation, sizable stock repurchase opportunity (estimated at 10% plus through 2025), and improved fundamentals that could lead to a re-rating of its shares over time.
Analysts at UBS are also encouraged by IHOP's continued sales momentum, believing its menu innovation and value will support same store sales gains.
Shares of Dine Brands Global eased 0.5% to $54.56 in late-morning trading on Tuesday and have fallen 18% year to date.
Contact Sean at sean@proactiveinvestors.com