Following a rocky ride recently, Ignite Restaurant Group stock could surge 51 percent over the next year, according to a new note from CL King & Associates upgrading the stock.
Shares of the restaurant company jumped as high as 8.3 percent higher after the report. (Click here to track the stock's latest price.)
The firm upped its rating on Ignite to a "strong buy" from "neutral" and its price target to $10 from the restaurant group's $6.60 closing price on Monday.
This makes it one of two firms who have a buy rating on the stock with the remaining four placing a "hold" rating on it, according to FactSet. The average target price stands at $8.50.
CL King based the target on a 10 percent discount to their sum-of-the-parts valuation of the company, which includes casual dining chains Joe's Crab Shack, Brick House Tavern + Tap and Romano's Macaroni Grill.
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The upgrade follows a volatile ride for the stock. Over the past 12 months, it has nosedived 40 percent amid declining comparable restaurant sales at Joe's and Macaroni Grill and a widening net loss.
Near term, sales trend improvement should support the company while its fast-growing Brick House Tavern concept could become worth more than the entire company and large enough to spin off soon, CL King says.
The brand's performance has outshined the company's other concepts. Brick House currently has 21 units and features more premium ingredients like wagyu beef and duck.
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"Brick House is ideally positioned for the next evolution of bar and grill, which as a category suffers from an old asset base and little differentiation among concepts," analysts write. "While we don't know yet how big the concept could get to be long term, we believe it is in the hundreds of units."
Over the next 1.5 years, CL King thinks Macaroni Grill will either improve significantly, shrink significantly or be divested or closed. Any of these outcomes would be positive, the firm says.
Recent improvement in the restaurant industry should also help the company's brands.