Why Analysts Favor a ‘Hold’ Recommendation for YUM! Brands



Analysts’ recommendations

As of April 21, 2016, Yum! Brands (YUM) was trading at $81.7. The share price might have already priced in the estimates that we discussed earlier in this series. In this part, we’ll look at analysts’ recommendations and estimated price targets over the next 12 months. Yum! Brands forms 0.32% of the holdings of the iShares Russell 1000 Growth ETF (IWF).

Analysts are Favoring ‘Hold’ Recommendation for YUM! Brands

With the expectation of a spin-off of its China division, Yum! Brands stock rose 12% since the beginning of 2016. The better-than-expected 1Q16 results and outlook provided by management compelled analysts to revise their price target for next 12 months to $85.1. Earlier, it was $82.2. The new target price represents a return potential of 4.2%.

On the higher side, Paul L. Westra of Stifel estimated that the stock could reach $100. On the lower side, Karen Holthouse of Goldman Sachs forecast a price of $66.

Over the next 12 months, the share prices of Papa John’s (PZZA) and McDonald’s (MCD) are expected to appreciate by 17.9% and 3.4%, respectively. However, the share price of Domino’s Pizza (DPZ) is expected to decline by 1.7%.

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Analysts’ recommendations

According to a Bloomberg consensus, of the 28 analysts surveyed, 39.3% recommended a “buy” for Yum! Brands, 53.6% recommended a “hold,” and 7.1% recommended a “sell.” As analysts raise their target prices for the next 12 months, the price of the stock could increase and vice versa.

A share price that’s lower than the target price doesn’t mean an automatic “buy.” Before investing, you should carefully analyze the various metrics we covered in this series.


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