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IHOP announced Wednesday that it will launch a fast-casual chain, Flip’d by IHOP, in spring 2020, and analysts think the move could finally get the pancake chain the upbeat investor sentiment it deserves.
IHOP is part of the Dine Brands Global Inc. DIN, +0.37% portfolio that also includes Applebee’s.
“We believe IHOP remains an under-appreciated part of the Dine Brands story (even though it contributes approximately two-thirds of consolidated EBITDA) and that an acceleration in net new unit growth would benefit both EBITDA growth and broader investor sentiment towards the story,” wrote Raymond James analysts led by Brian Vaccaro.
Raymond James rates Dine Brands stock outperform.
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The launch will start in Atlanta in April, with other major metro areas including Chicago and New York City under consideration.
The new chain aims to serve a fast, convenient breakfast in urban locations, though the Ultimate Steakburger and Buttermilk Crispy Chicken will also be on the menu in Atlanta. Other menu items include egg sandwiches and Pancake Bowls with assorted toppings like berries, sauces and bacon, which are designed to be eaten on the go.
Food can be ordered online in advance, at a counter or at digital kiosks. Catering will also be available.
Wedbush analysts led by Nick Setyan think growing the number of IHOP locations, including the new Flip’d chain, will be an EBITDA driver. Analysts met with management and say there’s the potential for more than 1,000 Flip’d locations.
The new chain is being launched as the company wraps up Applebee’s closures. Wedbush says any “worries around Applebee’s franchisee health is overblown.”
See: Coca-Cola launching a new sparkling water brand, Aha, in March 2020
After the meeting, Wedbush says it thinks it’s “realistic” that Dine Brands will have an annual low-single-digit same-store sales growth run rate starting in 2020.
Wedbush rates Dine Brands stock outperform with a $90 price target.
SunTrust Robinson Humphrey analysts also think Applebee’s is on the path to growth because of the brand’s size, which comes with purchasing power, marketing and the ability to leverage technology, and an appeal to young consumers.
SunTrust initiated Dine Brands at buy with a $111 price target on Tuesday.
“Specifically, we believe Applebee’s focus on deep value, off-premise sales and targeted marketing will drive positive same-store sales starting in the first quarter 2020 after difficult compares are lapped,” wrote SunTrust.
Dine Brands stock is up 24% for the year to date while the S&P 500 index SPX, +0.86% is up 26%.
