Is DRI a good stock to buy? We came across a bullish thesis on Darden Restaurants, Inc. on Elliot’s Musings’s Substack by Elliot. In this article, we will summarize the bulls’ thesis on DRI. Darden Restaurants, Inc.’s share was trading at $204.32 as of July 2nd. DRI’s trailing and forward P/E were 19.34 and 17.92 respectively according to Yahoo Finance.
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Darden Restaurants, Inc., together with its subsidiaries, owns and operates full-service restaurants in the United States and Canada. DRI delivered a fundamentally strong Q4 FY2026 despite two temporary distortions that masked the underlying performance: a 53rd fiscal week that inflated reported results while creating an optical headwind for FY2027 comparisons, and Olive Garden’s lighter-portions menu initiative, which reduced reported same-store sales by roughly 80 basis points despite underlying demand meeting expectations.
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Excluding these factors, the company met or exceeded expectations across key metrics, with adjusted EPS of $3.66, same-store sales growth of 4.6%, restaurant-level margin expansion, and LongHorn Steakhouse posting an exceptional 9.5% same-store sales increase, its strongest performance in years. While FY2027 guidance fell modestly below consensus and initially pressured the stock, the apparent slowdown largely reflects the absence of the 53rd week rather than weakening fundamentals, implying approximately 5.5% underlying organic revenue growth.
Management also expects beef inflation to pressure only the first quarter before easing later in the year, creating the potential for stronger earnings momentum through the second half of FY2027. Capital allocation remains a key strength, highlighted by a new $1.5 billion share repurchase authorization, an 8% dividend increase, manageable leverage, and continued investment in higher-return concepts through the conversion of Bahama Breeze locations into Chuy’s restaurants.
LongHorn continues to emerge as an increasingly valuable growth engine with strong pricing power, margin expansion, and market share gains, while Olive Garden’s reported weakness appears largely driven by temporary menu mix rather than deteriorating customer demand. Trading near the lower end of its historical valuation range, Darden offers an attractive combination of resilient cash generation, disciplined capital allocation, and high-quality brands.
If Olive Garden’s same-store sales normalize as the lighter-portions headwind fades and beef costs ease as expected, earnings could reach the upper end of guidance, supporting analyst price targets around $227-$235 over the next year and a potential three-year value approaching $307, representing an attractive long-term risk-reward profile.
Previously, we covered a bullish thesis on Texas Roadhouse, Inc. (TXRH) by Summit Stocks in February 2025, which highlighted the company’s differentiated operating model, disciplined expansion strategy, and long-term growth driven by unit expansion and comparable sales. TXRH’s stock price has appreciated by approximately 12.92% since our coverage. Elliot shares a similar view but emphasizes on Darden Restaurants’ temporary earnings distortions and earnings recovery catalysts.
Darden Restaurants, Inc. is not on our list of the 40 Most Popular Stocks Among Hedge Funds. As per our database, 39 hedge fund portfolios held DRI at the end of the first quarter which was 35 in the previous quarter. While we acknowledge the risk and potential of DRI as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than DRI and that has 10,000% upside potential, check out our report about this cheapest AI stock.
Disclosure: None.
