Sonic Corporation (NASDAQ:SONC) shares are tumbling 9.12% in mid-day trading to $25.11, after the company failed to meet consensus revenues. However, Oppenheimer analyst Brian Bittner recommends taking advantage of shares under $30, as it offers a compelling valuation. The analyst reiterated an Outperform rating on the stock, and a $40 price target, which implies an upside of 58% from current levels.
Bittner wrote, “We would take advantage of the stock at sub-$30 owing to unique valuation entry, potential upside to EPS through ’17E and tough comparison “fears” overdone. Management initiated ’16 EPS guidance (in-line with Street), which appears conservative in our model. Using the high end of management’s line-item assumptions drives 26% growth relative to the 14-18% EPS outlook. While higher interest expense (not guided) may somewhat offset, it’s not a major headwind. Comps for 4Q15 were pre-announced (in-line at +4.9%) with full earnings release on 10/19.”
“We maintain our estimates, which sit above consensus. While interest expense likely ticks up in ’16 as more debt is issued, we still see the mid-point of all management’s EPS drivers culminating into attractive upside to consensus,” the analyst added.
According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Brian Bittner has a total average return of 16.8% and a 73.3% success rate. Bittner has a 12.1% average return when recommending SONC, and is ranked #39 out of 3757 analysts.
Out of the 12 analysts polled by TipRanks, 7 rate Sonic stock a Buy, 4 rate the stock a Hold and only one rates it as a Sell. With a return potential of 40%, the stock’s consensus target price stands at $35.27.