11 Best Fast Food Stocks To Buy According to Analysts

Published on April 30, 2024 at 12:53 pm by Sheryar Siddiq in News, Quantitative Investing

In this article, we will be taking a look at the 11 best fast food stocks to buy according to analysts.

The fast food industry is synonymous with quick service, affordability, and continuous menu innovation, meeting consumers’ desires on multiple fronts. This global phenomenon shows no signs of slowing down, thanks to the ability of fast food chains to appeal to a vast consumer base, with these chains having expanded their reach worldwide and established enduring presences in international markets. Looking at the U.S. specifically, a study conducted by The Barbecue Lab revealed that the majority of Americans indulge in fast food one to three times per week, with over 83% of US families consuming it at least once a week. The study suggests that many perceive fast food as being “relatively inexpensive compared to other dining options,” with more than 32% of fast food consumers considering it cheaper than alternatives. However, despite this perception, the actual cost of fast food tends to be higher compared to home-cooked meals. Surprisingly, it is individuals with higher incomes who tend to consume more fast food than those with lower incomes, contrary to the common belief that lower-income families rely on fast food for its affordability.

Among the most renowned fast food chains with global reach are McDonald’s Corporation (NYSE:MCD), Domino’s Pizza, Inc. (NYSE:DPZ), and The Wendy’s Company (NASDAQ:WEN). Over the years, these companies, along with others in the industry, have cultivated strong brand loyalty and become household names for those seeking convenient takeout options. In such a dynamic landscape, established brands maintain their dominance despite the influx of new concepts, leveraging advancements in technologies like AI. McDonald’s Corporation (NYSE:MCD), for instance, acquired Dynamic Yield in 2019, a tech company specializing in personalization and decision logic. This acquisition enabled McDonald’s to enhance the drive-thru experience by offering dynamically changing menus based on factors such as weather, current restaurant traffic, and trending menu items. Similarly, Domino’s Pizza, Inc. (NYSE:DPZ) introduced an AI-powered pizza checker named DOM, leveraging machine learning to ensure the quality of each pizza before delivery. Starbucks Corporation (NASDAQ:SBUX) also embraced technology with its Deep Brew program, automating inventory management and predicting ingredient quantities to minimize waste and enhance operational efficiency.

Investing in the fast-food industry presents an intriguing opportunity, with reasonable valuations and promising growth prospects. However, not all companies in this sector are poised to outperform the market. Those capable of expanding their market share deserve premium valuations. In our previous coverage of the best fast food stocks back in March of 2023, companies like McDonald’s Corporation (NYSE:MCD) and Domino’s Pizza, Inc. (NYSE:DPZ) reigned supreme, with McDonald’s Corporation (NYSE:MCD) securing the top spot in the QSR 50 Report for 2022, affirming its position as the leading QSR company thanks to the company’s outstanding performance in 2021, both in terms of system-wide sales surpassing $112 billion and digital sales crossing the $18 billion mark. The company continued its performance the following year, with the QSR 50 Report for 2023 revealing that the company’s systemwide sales had grown by nearly $20 billion at the beginning of the year.

That said, how different are things from back then? For one, McDonald’s Corporation (NYSE:MCD) experienced a setback after mixed quarterly earnings in Q4 2023, leading some consumers to opt out of fast food. The company reported quarterly net revenues of $6.4 billion, slightly below the consensus estimate of $6.5 billion. Despite this, sales at company-operated restaurants increased by 12% year over year to $2.5 billion. Chris Kempczinski, the president and CEO of McDonald’s Corporation (NYSE:MCD), credited the company’s performance to the execution of the Accelerating the Arches strategy, the initiative which facilitated cumulative comparable sales growth of over 30% since 2019. Meanwhile, Domino’s Pizza, Inc. (NYSE:DPZ) aims to rebound from two lackluster years that saw its shares decline by over 3%.

In terms of growth, a research report by Precedence Research states that the global fast food industry reached an estimated value of $702.8 billion in 2021 and is projected to reach $964.6 billion by 2030, reflecting a compound annual growth rate (CAGR) of 4.0% from 2022 to 2030. The continuous evolution of the fast food market is driven by increasing demand for on-the-go snacks, convenience foods, and ready meals, influenced by the busy lifestyle of millennials and the growing population of working individuals worldwide. Furthermore, the expanding availability of delivery options and services also contributes to this growth.

11 Best Fast Food Stocks To Buy According to Analysts

Jonathan Weiss/Shutterstock.com

Our Methodology

To make our list of the best fast food stocks to buy according to analysts, we used a stock screener to list down a number of fast food stocks, ranking the firms by their average analyst share price target upside.

For these best fast food stocks to buy according to analysts, we have also mentioned hedge fund sentiment. Hedge funds’ top 10 consensus stock picks outperformed the S&P 500 Index by more than 140 percentage points over the last 10 years (see the details here). That’s why we pay very close attention to this often-ignored indicator.

11. Shake Shack Inc. (NYSE:SHAK)

Average Analyst Share Price Upside: 4.22%

Average Analyst Share Price Target: $101.31

Shake Shack Inc. (NYSE:SHAK) is an American fast-casual restaurant chain headquartered in New York City. It originated as a hot dog cart within Madison Square Park in 2001 and has since expanded across 30 U.S. states, as well as in the U.K., China, Kuwait, Mexico, Turkey, Japan, South Korea, and other regions.

In the final quarter of 2023, Shake Shack Inc. (NYSE:SHAK) reported a net income of $6.8 million, a significant improvement from the $8.1 million loss recorded in the previous year. Earnings per share also saw a positive turn, reaching a profit of $0.15 compared to a loss of $0.20 in the same period the year before. The company experienced a notable 20% increase in revenue year-over-year and successfully opened 15 new restaurants during the quarter. Looking ahead to 2024, Shake Shack Inc. (NYSE:SHAK) anticipates a total revenue growth of 11% to 15% and plans to open 80 new restaurants, aiming to reach nearly 600 locations, which is more than double its footprint from five years ago.

Our hedge fund data shows 28 funds long Shake Shack Inc. (NYSE:SHAK) in the fourth quarter, with a total stake value of $537.8 million.

Much like The Wendy’s Company (NASDAQ:WEN), McDonald’s Corporation (NYSE:MCD), and Starbucks Corporation (NASDAQ:SBUX), Shake Shack Inc. (NYSE:SHAK) ranks as one of the best fast food stocks to buy.

10. The Wendy’s Company (NASDAQ:WEN)

Average Analyst Share Price Upside: 10.38%

Average Analyst Share Price Target: $20.53

The Wendy’s Company (NASDAQ:WEN) is a quick-service restaurant chain with operations both in the United States and internationally. It operates through three main segments: Wendy’s U.S., Wendy’s International, and Global Real Estate & Development.

In the fourth quarter, 23 hedge funds expressed bullish sentiment towards The Wendy’s Company (NASDAQ:WEN), up from 18 funds in the previous quarter according to Insider Monkey’s database. Trian Partners, led by Nelson Peltz, emerged as the top shareholder of the company, holding 31.4 million shares valued at $613 million.

Oakmark Equity and Income Fund made the following comment about The Wendy’s Company (NASDAQ:WEN) in its Q1 2023 investor letter:

“The Wendy’s Company (NASDAQ:WEN)’s is the second-largest quick-service burger chain in the U.S. This iconic brand generates $13.3 billion of systemwide sales from 7,095 restaurant locations around the world. Wendy’s is an asset-light franchisor that earns most of its profits from royalties, franchise fees and rent. The business is insulated from food and labor inflation since 95% of the restaurant base is owned and operated by franchisees. Wendy’s topline has proven remarkably resilient through diverse economic climates, producing 12 straight years of positive same-restaurant sales. The company is well-positioned for accelerating topline growth due to its recent launch of a breakfast menu, steady market share gains, international expansion and new restaurant openings. Despite these favorable characteristics, we had an opportunity to purchase shares at ~17x free cash flow, representing a discount to its quick-service restaurant peers as well as private market transactions.”

9. Darden Restaurants, Inc. (NYSE:DRI)

Average Analyst Share Price Upside: 18.05%

Average Analyst Share Price Target: $180.67

Darden Restaurants, Inc. (NYSE:DRI) is a full-service restaurant company that offers a variety of dining options through its different segments: Olive Garden, LongHorn Steakhouse, Fine Dining, and Other Business. The Other Business segment encompasses additional brands such as Cheddar’s Scratch Kitchen, Yard House, Seasons 52, and Bahama Breeze.

Having reinstated its dividends in 2020, Darden Restaurants, Inc. (NYSE:DRI) has since raised its dividend payouts multiple times. Currently, the company offers a quarterly dividend of $1.31 per share, resulting in a dividend yield of 3.40% as of April 15.

As of the end of Q4 2023, 31 hedge funds tracked by Insider Monkey maintained stakes in Darden Restaurants, Inc. (NYSE:DRI), consistent with the previous quarter. These stakes collectively amount to nearly $567 million. Steadfast Capital Management emerged as the leading stakeholder of the company during Q4.

8. Restaurant Brands International Inc. (NYSE:QSR)

Average Analyst Share Price Upside: 19.59%

Average Analyst Share Price Target: $85.23

Restaurant Brands International Inc. (NYSE:QSR) is a Canadian-American multinational fast-food holding company formed in 2014 through the merger of Burger King and Tim Hortons, and later expanded with the acquisition of Popeyes in 2017.

In its fourth-quarter report, Restaurant Brands International Inc. (NYSE:QSR) posted a net income attributable to shareholders of $508 million, or $1.60 per share, a notable increase from $229 million, or $0.74 per share, in the previous year. Adjusted earnings, excluding items, stood at $0.75 per share. The company also saw a rise in net sales, up 8% to $1.82 billion. Typically serving as the primary revenue generator for Restaurant Brands International Inc. (NYSE:QSR), Tim Hortons’ same-store sales surged 8.4% during the quarter, surpassing estimates of 4.7%.

At the end of the fourth quarter of 2023, 27 hedge funds in the database of Insider Monkey held stakes worth $2.65 billion in Restaurant Brands International Inc. (NYSE:QSR), compared to 29 in the previous quarter worth $2.2 billion.

Pershing Square Holdings stated the following regarding Restaurant Brands International Inc. (NYSE:QSR) in its fourth quarter 2023 investor letter:

“Restaurant Brands International Inc.’s (NYSE:QSR) franchised business model is a high-quality, capital-light, growing annuity that generates high-margin brand royalty fees from its four leading brands: Burger King, Tim Hortons, Popeyes, and Firehouse Subs. Since Patrick Doyle joined as Executive Chairman in November 2022, QSR has announced various strategic initiatives and begun providing investors with more details about the business. Coupled with significant investments over the last few years to drive more consistent growth across each of its brands, QSR has entered a new era of what we believe will be consistently stronger performance.

In February, the company hosted an investor day and introduced a five-year growth outlook comprising 3%+ annual comparable sales and 5%+ net restaurant growth, driving 8%+ system-wide sales and operating income growth. We believe the company can outperform these targets, as expenses will grow slower than sales while it laps its investments at Burger King in the U.S. The company also updated investors on franchisee profitability with significant improvements at each of its brands, including nearly 50% increases in franchise profitability at Burger King in the U.S. and 30% at Tim Hortons in Canada…” (Click here to read the full text)

Restaurant Brands International Inc. (NYSE:QSR) joins the ranks of The Wendy’s Company (NASDAQ:WEN), McDonald’s Corporation (NYSE:MCD), and Starbucks Corporation (NASDAQ:SBUX) as one of the best fast food stocks to buy.

7. McDonald’s Corporation (NYSE:MCD)

Average Analyst Share Price Upside: 20.91%

Average Analyst Share Price Target: $323.3

Headquartered in Chicago, Illinois, McDonald’s Corporation (NYSE:MCD) stands as the largest fast-food restaurant chain operator globally. Originating from a single drive-in restaurant in San Bernardino, California in 1955, it has expanded to nearly 40,000 locations across more than 100 countries, serving over 60 million customers annually.

On February 5, McDonald’s Corporation (NYSE:MCD) unveiled its financial results for Q4 2023. The company reported an 8% year-over-year revenue increase, totaling $6.4 billion, alongside a net income of $2.04 billion. Its normalized EPS of $2.95 exceeded consensus estimates by $0.12.

As of Q4 2023, McDonald’s Corporation (NYSE:MCD) shares were held by 63 of the 933 hedge funds tracked by Insider Monkey, with a combined value of $2.1 billion. Ken Griffin’s Citadel Investment Group emerged as the largest shareholder, possessing 1.8 million shares valued at $533 million.

6. Starbucks Corporation (NASDAQ:SBUX)

Average Analyst Share Price Upside: 26.35%

Average Analyst Share Price Target: $107.30

Headquartered in Seattle, Washington, Starbucks Corporation (NASDAQ:SBUX) is an American multinational chain of coffeehouses and roastery reserves. With operations spanning over 80 countries, the company is celebrated for its roasted whole beans and ground coffees, ready-to-drink beverages, and diverse food offerings.

Wells Fargo recently reaffirmed an Overweight rating on Starbucks Corporation (NASDAQ:SBUX) with a $105 price target. This rating reflects optimism about menu innovation, higher prices, and other factors expected to drive the stock’s performance in the latter half of 2024.

As of the end of 2023, a total of 59 funds tracked by Insider Monkey held stakes in the coffee giant Starbucks Corporation (NASDAQ:SBUX).

RiverPark Advisors made the following comment about Starbucks Corporation (NASDAQ:SBUX) in its Q3 2023 investor letter:

“Starbucks Corporation (NASDAQ:SBUX): SBUX is the premier roaster, marketer and retailer of specialty coffee in the world, operating in 83 markets. Through its more than 36,000 global stores (roughly 50% operated and 50% licensed) the company offers handcrafted coffee, tea and other beverages and a variety of food items. SBUX also sells a variety of packaged coffee and tea products and licenses its trademarks through other channels such as grocery and foodservice through a Global Coffee Alliance with Nestlé. In addition to its flagship Starbucks Coffee brand, the company sells goods and services under the brands Teavana, Seattle’s Best Coffee, Ethos, Starbucks Reserve and Princi.

SBUX’s recently appointed CEO (March 2023), Narasimhan Laxman, reiterated the company’s long-term plans for 10-12% revenue growth and 15-20% EPS growth while reporting fiscal 3Q23 earnings. Revenue will be driven by a combination of factors including unit growth, higher food “attach” rates (more food sold per cup of coffee), equipment innovation to speed throughput, and delivery expansion. In addition to the leverage of higher revenue across the company’s fixed asset base, SBUX sees margin expansion from supply chain management opportunities and procurement efficiencies. We initiated a small position in August.”

5. Dave & Buster’s Entertainment, Inc. (NASDAQ:PLAY)

Average Analyst Share Price Upside: 27.78%

Average Analyst Share Price Target: $71.67

Dave & Buster’s Entertainment, Inc. (NASDAQ:PLAY) is a Dallas-based American restaurant and entertainment enterprise known for its unique combination of dining, bar services, and arcade games, notably featuring the “Million Dollar Midway”. Recently, the company unveiled an updated dine-in menu, introducing over 20 new food and beverage options, alongside offering a 50% food discount to members of its rewards program. This initiative, part of Phase 3 of the company’s plan, aims to boost food and beverage sales.

In the fourth quarter of Fiscal Year 2023, Dave & Buster’s Entertainment, Inc. (NASDAQ:PLAY) reported revenue of $599.1 million, marking a 6.3% increase compared to the same period in the prior year. For the full fiscal year, revenue amounted to an impressive $2.2 billion, demonstrating robust year-over-year growth of 12.3%. However, the company faced challenges with comparable store sales, which declined by 7% in Q4 and by 6.2% for the full fiscal year.

As of the end of the December quarter, 21 hedge funds in Insider Monkey’s database of 933 hedge funds had stakes in Dave & Buster’s Entertainment, Inc. (NASDAQ:PLAY). The biggest stakeholder of Dave & Buster’s Entertainment, Inc. (NASDAQ:PLAY) was Scott Ross’s Hill Path Capital which had a $383.3 million stake in the company.

4. Papa John’s International, Inc. (NASDAQ:PZZA)

Average Analyst Share Price Upside: 30.20%

Average Analyst Share Price Target: $80.44

Papa John’s International, Inc. (NASDAQ:PZZA), operating as Papa John’s, is an American pizza restaurant chain ranked as one of the largest pizza delivery restaurant chains in the United States. It has headquarters in the Louisville, Kentucky, and Atlanta, Georgia metropolitan areas.

In its fourth-quarter 2023 results, Papa John’s International, Inc. (NASDAQ:PZZA) reported revenue of $2.1 billion, which closely aligned with analyst forecasts. However, the company exceeded expectations with statutory earnings per share of $2.48, surpassing analyst estimates by 3.5%.

According to Insider Monkey’s fourth quarter database, 19 hedge funds were bullish on Papa John’s International, Inc. (NASDAQ:PZZA), with collective stakes worth $36.5 million. Israel Englander’s Millennium Management is a notable position holder in the company, with 67,650 shares valued at $5.15 million.

Artisan Small Cap Fund made the following comment about Papa John’s International, Inc. (NASDAQ:PZZA) in its Q3 2023 investor letter:

“Notable trims in the quarter included Papa John’s International, Inc. (NASDAQ:PZZA) Advanced Drainage and BlackLine. Papa John’s is a global operator and franchisor of pizza delivery and carryout restaurants. We originally invested in the company after a complete executive management team overhaul— notably, hiring a CEO, Rob Lynch, to spearhead a turnaround. Mr. Lynch brings previous leadership experience at large franchisors Arby’s and Taco Bell—where he worked alongside current Chipotle CEO Brian Niccol—and a marketing background at P&G. At Arby’s, Mr. Lynch led a turnaround effort where he shaped the company’s successful “We have the meats!” marketing campaign. Mr. Lynch has focused on reestablishing Papa John’s premium positioning with new food options, advertising campaigns and operational cost-cutting measures meant to improve margins. While we continue to believe in the long-term turnaround story, it is taking longer than we had originally expected. We began to harvest the position to fund higher conviction ideas.”

3. Yum China Holdings, Inc. (NYSE:YUMC)

Average Analyst Share Price Upside: 35.22%

Average Analyst Share Price Target: $50.49

Yum China Holdings, Inc. (NYSE:YUMC), headquartered in Shanghai, stands as one of the largest restaurant companies in China, boasting over 14,000 restaurants spread across more than 1,900 cities on mainland China. The company emerged through a separation from Yum! Brands, Inc. (NYSE:YUM) in November 2016, subsequently listing its shares on the NYSE.

As of Q4 2023, Insider Monkey’s database revealed that 22 hedge funds, out of 933 tracked, held shares of Yum China Holdings, Inc. (NYSE:YUMC), with a combined value of $784 million. GuardCap Asset Management emerged as the largest shareholder, holding ownership of 8.83 million shares.

2. Jack in the Box Inc. (NASDAQ:JACK)

Average Analyst Share Price Upside: 45.21%

Average Analyst Share Price Target: $86.47

Founded in 1951 by Robert O. Peterson in San Diego, California, Jack in the Box Inc. (NASDAQ: JACK) is an American fast-food restaurant chain headquartered in the same city. With over 2,200 locations, it primarily serves the West Coast of the United States.

In March 2024, Jack in the Box Inc. (NASDAQ: JACK) received positive news when Wedbush upgraded its share rating from Neutral to Outperform and raised the share price target to $88 from $79.

Among the 933 hedge funds tracked by Insider Monkey’s Q4 2023 database, 21 had acquired and held shares of the company. The largest hedge fund shareholder of Jack in the Box Inc. (NASDAQ: JACK) in the database is Arrowstreet Capital, led by Peter Rathjens, Bruce Clarke, and John Campbell, with a $30.2 million investment.

1. Portillos Inc (NASDAQ:PTLO)

Average Analyst Share Price Upside: 67.72%

Average Analyst Share Price Target: $21.67

Portillos Inc. (NASDAQ:PTLO) is a fast-casual restaurant chain based in the Chicago area, renowned for its Chicago-style fare, including hot dogs, Maxwell Street Polish, and Italian beef.

In February, Portillos Inc. (NASDAQ:PTLO) announced its Q4 results. The company reported an adjusted EPS of $0.13 for the period, surpassing estimates by $0.07. Additionally, revenue for the period experienced a substantial 24.5% year-over-year increase, reaching $187.9 million, which exceeded estimates by $3.68 million.

A total of 19 hedge funds in Insider Monkey’s database of 933 funds had stakes in Portillos Inc (NASDAQ:PTLO). The biggest hedge fund stakeholder of Portillos Inc (NASDAQ:PTLO) during this period was William B. Gray’s Orbis Investment Management which owns a $83.24 million stake in Portillos Inc (NASDAQ:PTLO).