Cheesecake Factory (CAKE) Stock Forecast & Price Target

The Cheesecake Factory Inc. has demonstrated promising operational performance, reflected in a 14.5% year-over-year increase in adjusted EBITDA, reaching approximately $66 million, along with a 3.7% adjusted net income margin, which marks a 40 basis points improvement from the previous year. The company's focus on enhancing labor efficiencies and ongoing productivity initiatives is projected to contribute to an expansion of restaurant-level margins from around 15.9% in FY25 to 16.1% in FY26, providing a buffer against wage and inflationary pressures. Notably, the Cheesecake Factory brand has achieved significant restaurant-level margin expansion of approximately 500 basis points over the last two and a half years, advancing from 12.5% to 17.5% on a trailing twelve-month basis.

The Cheesecake Factory's guidance for fourth quarter revenues of $940–$955 million indicates a potential decline in comparable sales, with the Cheesecake Factory segment possibly facing a (1%) to flat growth, contrasting with consensus expectations of +1%. North Italia has reported a notable decline of (3%) in comparable sales, which, combined with weakness in day-part performance and pricing pressures, reflects underlying issues in consumer traffic and discretionary spending. Additionally, revelations of cannibalization from new unit openings and significant softness in weekday sales further underscore concerns regarding the company's ability to maintain growth amid an increasingly challenging retail environment.