Inside Wall Street
A BURGER JOINT THAT COULD SIZZLE
Is there room for yet another hamburger chain in the crowded fast-food industry? The bears are convinced a new entry can only fail, and they are shorting Checkers Drive-In Restaurants, a fledgling burger operation that started up in 1988. Wrong, says veteran restaurant industry analyst Roger Lipton of Ladenburg Thalmann. He thinks Checkers, found mainly throughout the Southeast, will be a big winner.
The company, he notes, has been growing at breakneck speed, with the number of its eateries more than doubling from 56 in 1990 to 117 last year. That figure is expected to increase to 218 by the end of 1992. Checkers' strategy: Serve a limited menu at cheap prices--with fast service.
Checkers' stock has zoomed to a high 36 a share in March from 14 in late 1991, when it went public. It has since eased to 31. The stock has caught the attention of the shorts, who note that it is trading at a lofty price-earnings ratio of 46. Betting on a collapse, they have sold short some 1.4 million shares, which comes to 10% of the shares outstanding.
Lipton believes the shorts could end up squeezed. "The stock could double in price in another 12 months," he says. Lipton figures that Checkers, which earned 30 cents a share last year, will make 67 cents this year and $1.05 in 1993.GENE G. MARCIAL