Longbow Research bumped up its rating of Papa John's shares to buy from neutral, saying "it can only get better from here."
"We believe negative investor sentiment is now fully baked into the share price," Longbow analyst Alton Stump wrote in a note Monday. "We believe the shares of [Papa John's] represent an attractive entry point ahead of a recovery in same-store sales and/or transaction taking place."
Longbow has a price target of $52 a share on the stock, after it cratered over the last three months, falling over 28 percent through Friday's close of $40.66 a share.
"The negative impact from Mr. Schnatter's comments may not be as bad as many expected," Stump said. "The company will likely receive a pass from investors for at least the next quarter or two while management implements changes to its branding and marketing."
Papa John's stock price rose 3.9 percent Monday, closing at $41.81 a share.
While Stump noted an acquisition of Papa John's any time soon "is highly unlikely," he said the company's "effort to move away from John Schnatter as the face of the company ... will help grease the skids for a potential acquisition to take place." Speculation about the possible sale of Papa John's will "likely provide a floor for the share price," Stump said, giving the stock a floor near its current price.
In addition, Schnatter's shot at the NFL last November and Papa John's eventual loss of its place as the league's official sponsor is not expected to "have a negative impact" on Papa John's same-store sales, Stump said.