Billionaire Ackman Ramps Up Stake in Restaurant Brands; Oppenheimer Sees Buying Opportunity

Billionaire hedge fund manager Bill Ackman and his Pershing Square Management have increased their stakes in Restaurant Brands International Inc. (QSR) to 9.6%, writing that the stock is “undervalued” and is an “attractive” investment.

According to a SEC filing, Ackman and Pershing Square now own a combined 29 million shares, or 9.6% stake in Restaurant Brands, up from about 6.6% previously. Shares in the owner of Burger King and Tim Hortons were up 5% to $51.50 in pre-market U.S. trading.

The filing also disclosed that Ackman and Pershing intend to hold discussions with Restaurant Brands’ management, board of directors, and other stockholders about its business management and future strategic plans.

Five-star analyst Brian Bittner at Oppenheimer, who has a Buy rating on the stock with a $60 price target views Restaurant Brands as his “top large-cap pick”. Shares in Restaurant Brands have dropped about 28% since mid-February compared with the 17% decline in the S&P 500 Index.

“We believe this underperformance represents an interesting opportunity to own QSR at a significant discount given the relatively limited downside to earnings and FCF estimates versus peers,” Bittner said in a note to investors on Monday. “From a capital requirement standpoint, our work suggests a still robust cash flow profile and significant cash balance ($2.5 billion), more than enough to fund all cash needs.”

Overall, Wall Street analysts share Bittner’s bullish outlook awarding the stock with a Strong Buy rating based on 15 Buys and 3 Holds. The $59.24 average price target provides investors with 21% upside potential in the coming 12 months. (See Restaurant Brands stock analysis on TipRanks).

Pershing’s Ackman in recent weeks bought up more shares of the fund’s portfolio companies including, Hilton Worldwide Holdings Inc. (HLT) and Warren Buffet’s Berkshire Hathaway (BRK.A). Ackman is also upbeat about investment into infrastructure projects helping the U.S. economy recover from the repercussions of the coronavirus outbreak. In March, Pershing invested $500 million in Howard Hughes Corp. (HHC), one of the largest real estate development companies in the US.

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