Bear Stearns downgraded The Cheesecake Factory (CAKE) to peer perform from outperform, citing the Calabasas Hills, Calif-based restaurant chain's quarterly results.
Analyst Ashley Reed Woodruff noted slower than expected square footage growth related to the company's new unit opening delays. Her new pre-option expense earnings per share (EPS) estimate for 2006 is now $1.27, down from $1.30, up only 17% year over year vs. the company's 20% long term target. She thinks the company is shifting back to a period of missing estimates, and doesn't think the impact of the square footage growth slowdown is well understood in the market. She thinks the stock is fairly valued as shares have recovered significantly over the past several months. She has a $37 to $38 target, which is 25 times her 2007 EPS estimate.