Shares of Cheesecake Factory (CAKE) are trending up nearly 5% in pre-market trading this morning following an activist investor’s push for a breakup. Houston-based JCP Investment Management is urging the company to split its three smaller food brands into a separately listed company. The investor also vowed to infuse some capital into the new company to spur its growth. The Wall Street Journal was the first to report this matter.
Here’s How JCP’s Suggestion Could Help Cheesecake Factory
JCP has built a roughly 2% stake in Cheesecake Factory. The activist believes that spinning off North Italia, Flower Child, and Culinary Dropout brands into a separate company could enhance the value of the individual companies. JCP believes that by splitting the company into two focused entities, the respective managements will be better able to meet their financial goals.
Cheesecake Factory runs more than 300 stores in North America, including stores under the three smaller brands. CAKE shares have gained nearly 24% so far this year, and the company has a market capitalization of $2.2 billion. The post-COVID-19 scenario has been particularly difficult for smaller restaurant operators, marred with sky-high inflation and elevated interest rates.
Hedge Funds Accumulate CAKE Shares
Hedge funds are accumulating Cheesecake Factory shares, according to TipRanks Hedge Funds Trading Activity Tool. Based on the tool, CAKE has a Very Positive Hedge Fund Confidence Signal since hedge funds have increased their CAKE holdings by 486,800 shares in the last quarter.
Is Cheesecake Factory Stock Good?
Analysts remain on the sidelines on Cheesecake Factory stock. On TipRanks, CAKE has a Hold consensus rating based on four Buys, six Holds, and three Sell ratings. Also, the average Cheesecake Factory price target of $41.09 implies 3.2% downside potential from current levels.
