Stephens has downgraded Cheesecake Factory stock to Equal Weight from Overweight and left its price target unchanged at $65.00. The firm cited valuation as the primary constraint on further upside after a significant year-to-date appreciation in the shares.
The company is trading at a price-to-earnings ratio of 19.46 and carries a market capitalization of $3.19 billion. Stephens noted that the stock has climbed roughly 27% year-to-date - a pace that has outstripped peer performance - and indicated that, absent a notable change to earnings growth for the year, there appears to be limited room for additional gains from current levels.
Cheesecake Factory reported fourth-quarter fiscal 2025 results that topped consensus on both revenue and adjusted earnings per share. The operator posted adjusted EPS of $1.00, narrowly above the analyst estimate of $0.99, and generated $961.56 million in revenue versus the consensus estimate of $949.61 million. Revenue for the quarter represented a 4.4% increase from $921.0 million in the same period a year earlier.
Despite the upside on the top and bottom lines, comparable restaurant sales at Cheesecake Factory locations declined by 2.2% year-over-year in the fourth quarter, with a sequential deceleration in that metric. North Italia - the company's fast-casual concept - recorded a larger comparable-sales decline of 4.0% in the quarter, signaling softer traffic trends at that brand.
Over the last twelve months, the company produced $3.71 billion in revenue, reflecting a reported growth rate of 4.9%. For fiscal 2026, the guidance presented by management implies comparable-sales performance modestly ahead of Wall Street estimates.
To defend and stimulate traffic, management is pursuing several tactical initiatives. The company is promoting its Bowls and Bites menu items and refining Rewards program targeting. Leadership also plans a mobile app rollout in the first half of 2026 as a component of customer engagement and retention efforts.
Stephens acknowledged Cheesecake Factory as a solid operator with a durable business model, but said the current valuation reflects the firm's steady, rather than accelerating, growth amid a pressured consumer backdrop. Additional metrics cited include a 1.69% dividend yield and a PEG ratio of 0.79, which the analyst firm noted as indicating a relatively low P/E versus near-term earnings growth expectations.
Market data referenced by analysts shows a year-to-date total return in the high-20s percentage range and suggests the stock is trading above its assessed fair value. As a result, Stephens moved to a more neutral stance on the shares while keeping its $65 target intact.
Investors and market participants will be watching whether the company can sustain margin improvements at the restaurant level and reverse comparable-sales declines, particularly at North Italia. The combination of modest guidance upside and tactical consumer-facing initiatives will be key to determining whether the stock can justify its current valuation.
What to watch next
- Execution of Bowls and Bites and targeted Rewards promotions as traffic defense measures.
- Rollout and adoption of the planned mobile app in the first half of 2026.
- Quarterly comparable-sales trends and restaurant-level margin performance.