The restaurant space has been on a tear in recent months, with names like Chipotle, Darden Restaurants and Cheesecake Factory soaring double digits. Some market watchers are cautious on the stocks, given how far many of them have come.
Darden Restaurant's notable move Thursday, following a strong earnings report, underscores the group's big run. The stock is now up 27 percent in the last three months, while names like Chipotle, Cheesecake Factory and Domino's have soared a respective 40 percent, 23 percent and 30 percent in the same time period.
Rising gasoline prices, climbing interest rates and falling saving rates are among the longer-term concerns for Matt Maley, equity strategist at Miller Tabak, surrounding the fast food and casual dining space. In the short term, it's their valuations that gives him real pause.
"They're just so overbought. They've had these huge moves. With Domino's, the fundamentals look real solid there," but the company's shares have risen 52 percent in the last six months alone, he noted Thursday on CNBC's "Trading Nation. "
Maley noted the stock's weekly relative strength index is above 81, a level it hasn't touched in three years, and trading a stunning 100 percent above its 200-day moving average.
"The same thing goes for Shake Shack, " he said, pointing to a weekly relative strength index that would suggest extended trading.
Other strategists echo rising interest rates as a risk.
"The consumer is strong right now, so I think the restaurant stocks are going to be beneficiaries. Although, wage growth is definitely outpacing inflation at this time. At some point, interest rates will eat into the consumer's ability to spend, especially since we are starting to see recession-type levels of delinquencies and charge-offs at some of the small commercial banks," Mark Tepper, president and CEO of Strategic Wealth Partners said on "Trading Nation."
"But for now, all is good," he said. Tepper said he liked Domino's shares here and owns shares of Darden Restaurants for clients.
"When it comes to Domino's, everyone loves pizza," Tepper added. "And not only does everybody love pizza, but I think the most recession-proof foods would be pizza and ramen noodles."