Panera Bread Company (NASDAQ: PNRA) reached a share price where you just know that analysts had to either start lifting their price targets or would have to make downgrades based upon valuation. Shares closed Friday at $151.83 and the consensus price target is closer to $148.50 against a 52-week trading range of $94.62 to $152.93. In short, the stock had risen and gone above consensus price targets.
The reaction so far appears to be “downgrading on valuation.” Raymond James downgraded the stock to “Market Perform” from an “Outperform” rating.
The new price after the drop is still dangerously close to the consensus analyst target as the 3.7% drop on Monday has shares around $146.20. With Thomson Reuters having consensus earnings at $4.65 EPS for 2011 and $5.50 EPS for 2012, Panera trades at over 31-times 2011 earnings and over 26-times projected 2012 earnings. While it is still growing sales and earnings faster than the S&P, investors are having to pay a multiple about twice as much as the broad market. The downgrade on valuation makes sense here unless Panera has a lot more hidden earnings power coming down the pipe much sooner than expected.
JON C. OGG
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