Trump deportations are a headwind for this fast food stock, Stifel warns
Aggressive U.S. immigration policies could mean trouble for Jack in the Box , according to Stifel. The investment firm downgraded shares of the fast-food restaurant chain to hold from buy. Analyst Chris O'Cull also lowered his price target to $20 per share from $32, implying 17% upside. O'Cull said President Donald Trump's aggressive immigration policies will likely create a significant sales headwind, with unrest and fears of deportation further squeezing the stock. The analyst noted that Jack in the Box is significantly more popular with Hispanic consumers in particular, versus other quick service restaurants. "With a heavy concentration of JIB stores on the West Coast (50%+ system units) and specifically in SoCal (~30% of system units), the disruption to foot traffic, curfews, and broader community unease has likely weighed heavily on sales in some trade areas," he wrote. "More broadly, we believe Hispanic customers are likely to pull back in response to the highly publicized immigration enforcement actions that sparked the unrest." Deteriorating sales are also a headwind for a stock that's down 59% year to date, O'Cull said. JACK YTD mountain JACK YTD forecast "If sales trends continue to deteriorate, the company may fall short of its internal free cash flow targets, which could delay or reduce the scale of planned debt repayment. While we continue to believe the company will be able to execute a sale of Del Taco given the steady inbound interest, the timing and valuation of the transaction will be critical in determining how much deleveraging progress can be made," he noted. Jack in the Box shares shed more than 1% in the premarket following the downgrade. Most analysts are on the sidelines when it comes to Jack in the Box. LSEG data shows that 13 of 20 analysts covering the stock have a hold rating.
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