Yum Brands, the parent company of Taco Bell, is currently trading at a discount, prompting Morgan Stanley to upgrade its rating from equal weight to overweight. The investment bank raised its price target for the stock from $180 to $185, suggesting a potential upside of 26% based on Tuesday's closing price.
Analyst Brian Harbour expressed that Yum's shares have remained flat year-to-date and do not reflect the company's growth potential. He highlighted that Yum's current trading multiple of around 21 times forward earnings is below its five-year average, indicating that the stock deserves a higher valuation due to a stronger growth outlook compared to the pre-pandemic period.
Harbour also pointed out that Yum's strategy to implement successful marketing and operational tactics from Taco Bell at KFC could unlock new market opportunities. Additionally, as consumers seek value amidst rising energy prices and economic uncertainties, Yum's extensive portfolio of affordable quick-service restaurants positions it well to benefit from these trends.
Despite Morgan Stanley's positive outlook, the consensus among analysts is mixed, with only 13 out of 29 recommending a buy or strong buy on Yum Brands, as the stock has declined by 3% this year, underperforming the broader market