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Why Are Analysts Rating Jack in the Box a ‘Buy’?

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Analysts’ recommendations

On May 2, 2016, Jack in the Box (JACK), which forms 0.17% of the holdings of the iShares Russell 2000 ETF (IWM), was trading at $68.70. The share price may have already factored in the estimates we’ve discussed in this series. In this article, we’ll look at analysts’ recommendations and the estimated target prices for the stock over the next 12 months.

Why Analysts Favor a ‘Buy’ for Jack in the Box?

Since JACK’s 1Q16 results failed to meet analysts’ estimates, its share price has declined by 9%. As of May 2, 2016, analysts are expecting the share price of JACK to reach $81.20 over the next 12 months, which represents a return potential of 18.1%. On the higher side, Nick Setyan of Wedbush Securities has forecast that the price will reach $90, while on the lower side, David E. Tarantino of Robert Baird has estimated that the price will touch $70.

The 12-month targets of JACK’s peers are as follows:

  • McDonald’s (MCD): $132.70 with a return potential of 3.5%
  • Restaurant Brands International (QSR): $45.30 with a return potential of 1.3%
  • The Wendy’s Company (WEN): $11.60 with return potential of 2.3%
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Analysts’ recommendations

According to a Bloomberg survey of 16 analysts, 56.3% have “buy” recommendations for Jack in the Box (JACK) and 43.8% have “hold” recommendations. The share prices of JACK move in tandem with analysts’ recommendations. As analysts raise their next-12-month target prices, the share prices of the stock may also increase, and vice versa.

When the share price are being traded at a lower price than the target price, it does not mean an automatic buy. The investor should carefully analyze the metrics we’ve discussed before investing.

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