As they do every year, the major Wall Street firms we cover here at 24/7 Wall St. come out with a list of stocks that they feel will be the top performers for the coming year. Last year was a veritable train wreck compared to most years, with everything from the pandemic that crippled the economy on and off and killed hundreds of thousands to a roller-coaster stock market that dropped 35% in less than a month and has since rallied to all-time highs. Nonetheless, the analysts across Wall Street are doing their jobs, and the top picks are still coming out fast.

With many across Wall Street concerned that valuations are very stretched, it makes sense for investors to consider thinning the momentum herd in portfolios and perhaps looking for growth ideas that are less crowded. In fact, many analysts are suggesting broad sector rotation, and a new Goldman Sachs report is very positive on a group that struggled mightily during 2021.

Goldman Sachs initiated coverage on the restaurant segment and is very positive for this year. The firm noted that the industry lost a staggering $150 billion in 2020, and analysts expect that market shares of the large chains will increase by 5% to 25% in 2021. They start coverage on 10 of the top restaurant stocks, and here we focus on four with the biggest upside potential. While these stocks are rated Buy, it is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.

Chipotle Mexican Grill

The company remains a favorite destination for those looking to eat out, and its stock is a member of the Goldman Sachs Conviction List of top picks. Chipotle Mexican Grill Inc. (NYSE: CMG) operates more than 2,400 fast-casual Mexican restaurants offering freshly made burritos, tacos, burrito bowls and salads.

It is 100% company operated and runs average unit volumes much higher than peers. Goldman Sachs is very positive and the report noted this:

Chipotle established a strong foundation with a focus on operations, supply chain, and marketing over the last 2 years. The digital transformation brought about by COVID will allow Chipotle to leverage its digital ecosystem — strong mobile app, rapidly growing loyalty program (~20 million members in just 2 years), 3rd party delivery, and Chipotlane digital drive-thru’s — to drive top-line growth and improving margins.

The Goldman Sachs price target for Chipotle Mexican Grill stock is $1,650. That compares with a Wall Street consensus target of $1461.31 and a Wednesday closing price of $1480.62 per share.

The fast-food giant continues to revamp both stores and the menu, and it is a solid pick for more conservative accounts. McDonald’s Corp. (NYSE: MCD) is the world’s leading global food-service retailer with over 39,000 locations serving approximately 69 million customers in over 100 countries each day. More than 80% of McDonald’s restaurants worldwide are owned and operated by independent local businesspersons.

The company has built a product pipeline, including a new chicken sandwich, a McPlant line and follow-on celebrity promos. Goldman Sachs feels the key driver of the McDonald’s story will shift to a technology scale that competitors will struggle to replicate. This tech evolution is supporting a wave of consolidation, while it creates pressure on small and mid-tier players.

The analysts said this about the fast-food giant:

We believe that McDonalds will benefit broadly from economic re-openings in 2021, and the company’s investments in technology, a renewed marketing strategy, loyalty, and menu innovation will drive share gains in the industry. We model fiscal year 2021 and 2022 same-store-sales of 16.1%/4.2% (versus Consensus 13.6%/4.1%) and unit growth slightly ahead of Consensus, which drives our fiscal year 2021 and 2022 EBITDA estimates +3.0%/+3.5% versus consensus estimates.

McDonald’s stock investors receive a 2.42% dividend. Goldman Sachs has a $237 price target, while the consensus target is higher at $241.82. The shares were last seen on Wednesday at $213.63.

Starbucks

Shares of this retail giant have traded down some recently and are offering a very solid entry point. Starbucks Corp. (NASDAQ: SBUX) operates as a roaster, marketer and retailer of specialty coffee worldwide. Its stores offer coffee and tea beverages, packaged roasted whole bean and ground coffees, single-serve and ready-to-drink coffee and tea products, juices and bottled water.

The company also licenses its trademarks through licensed stores, and grocery and national foodservice accounts. The company offers its products under the Starbucks, Teavana, Tazo, Seattle’s Best Coffee, Evolution Fresh, La Boulange, Ethos, Starbucks VIA, Seattle’s Best Coffee, Frappuccino, Starbucks Doubleshot, Starbucks Refreshers and Starbucks Discoveries Iced Café Favorites brand names.
Goldman Sachs feels Starbucks is another technology leader:

We believe Starbucks will be a key beneficiary of the economic re-opening in 2021 as consumers revert to more normalized work routines, mobility and travel return to urban centers, and the company benefits from its digital leadership. We also see benefits from the company’s shift towards suburban markets (drive-thrus) and smaller footprint locations in urban centers.

Shareholders receive a 1.71% dividend. The $115 Goldman Sachs price objective is greater than the $105.62 consensus target. Starbucks stock closed at $105.46 on Wednesday.

Wingstop

This stock has solid upside potential, and with the NFL playoffs in full swing, you can bet the orders will continue to skyrocket. Wingstop Inc. (NASDAQ: WING) operates and franchises more than 1,300 locations worldwide. The company is dedicated to serving the world flavor through an unparalleled guest experience and offering of classic wings, boneless wings and tenders, always cooked to order and hand-sauced-and-tossed in fans’ choice of 11 bold, distinctive flavors. Wingstop’s menu also features signature sides including fresh-cut, seasoned fries and freshly made ranch and bleu cheese dips.

Goldman Sachs has been very bullish on the shares for some time and said this:

We believe Wingstop is still in the early innings of a long-term growth story as the company has a strong, digitally-focused foundation to support unit growth. Wingstop is 98% franchised with just ~1,500 units globally (1,300 domestic, ~200 international) with some of the best unit-level economics the industry lending support to franchisee demand. We acknowledge that same-store-sales trends in 2021 will likely be challenged by the strong year-over-year comparisons, but we continue to focus on the long-term prospects in this high-growth, asset light model. We see a long runway for unit growth — both domestically and internationally — and believe valuation still looks attractive on a growth-adjusted basis.

Goldman Sachs has set a $165 price objective. The consensus target price is $149.95, and the last trade for Wingstop stock on Wednesday was at $152.48 a share.

Goldman Sachs These four stocks have all been reasonably strong but still have double-digit upside potential for 2021. In addition, with the market fully valued, and the possibility for a pullback in the cards, these all act somewhat defensively when the going gets tough. That is a huge positive for those wanting to stay invested but nervous about the lofty market levels.

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