Fast-food operators are likely to face some headwinds over the coming year, broking house Morgans says, but there is still room for operators to grow.
The RBA is back at 4.35% after three rises this year and looks set to hike again in late September.
The broker said that for fast-food operators, growth has to come from increased sales, not price, "because a household absorbing a fourth rate rise will likely trade down or out if prices rise further again''."
Second in line is Collins Foods Ltd, with Morgans having a price target of $10.60 against $7.93.
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Summarized version
Morgans' top pick in the sector is Guzman Y Gomez Ltd, with a price target of $31 against $25.04 at the time of writing. Second in line is Collins Foods Ltd, with Morgans having a price target of $10.60 against $7.93 at the time of writing.
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The article, shortened and in plain language
Fast-food operators are likely to face some headwinds over the coming year, broking house Morgans says, but there is still room for operators to grow.
Morgans has named two companies as their top picks in the sector, with share price targets that imply solid gains for investors.
The RBA is back at 4.35% after three rises this year and looks set to hike again in late September. Consumer sentiment has dropped to 84.4, below neutral and weaker than a year ago, with real incomes still going backwards.
The broker said that for fast-food operators, growth has to come from increased sales, not price, "because a household absorbing a fourth rate rise will likely trade down or out if prices rise further again''."
Morgans' top pick in the sector is Guzman Y Gomez Ltd, with a price target of $31 against $25.04.
Second in line is Collins Foods Ltd, with Morgans having a price target of $10.60 against $7.93.
Morgans has a hold rating on Domino's Pizza Enterprises Ltd with a price target of $20 compared to $19.45.
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