Top restaurant stocks to watch, according to Raymond James

Raymond James has identified select restaurant stocks as top investment ideas following the sector’s significant underperformance during the third quarter, particularly in September. The firm attributes the weakness to broader market flows into AI and technology stocks, along with macro and valuation concerns tied to higher oil prices and interest rates.

Casual dining demand trends remain resilient with third-quarter comparable sales better than the second quarter, despite lapping tough comparisons from 2025. Meanwhile, limited service restaurants remain soft, facing cyclospora headwinds and greater exposure to lower-income consumers and higher gasoline prices. Casual dining appears to benefit from a relatively stronger middle and upper-income consumer, stronger value perceptions relative to quick-service restaurants, and more effective social media strategies attracting new and often younger guests.

Wingstop Inc. (WING)

Raymond James expects weak third-quarter results, but anticipates investor focus will shift to improved trends in September and October. New value promotions and messaging appear to be gaining traction since the start of football season. If this continues, it could support low single-digit percentage declines in the fourth quarter followed by flat or slightly positive performance into the first quarter. The firm expects double-digit percentage unit growth in 2027 supported by strong franchisee returns with approximately two-year paybacks and accelerating international growth.

Brinker International Inc. (EAT)

Raymond James upgraded EAT to Strong Buy from Outperform. The firm expects a strong beat and raise, with confidence in above-consensus estimates including first-quarter earnings per share of $2.57 on Chili’s comparable sales up 9 percent. Raymond James is raising fiscal 2027 EPS estimates to $13.65 versus consensus of $13.26. The firm sees tangible levers to sustain mid-single-digit percentage comparable sales growth through menu, marketing, and operations. Valuation appears attractive with calendar year 2027 price-to-earnings ratio of approximately 15 times on a 52-week basis.

Shake Shack Inc. (SHAK)

Raymond James is optimistic that at least in-line third-quarter comparable sales and store margins can begin to rebuild investor confidence. Spot ground beef prices have turned deflationary in recent weeks, which could provide some second-half margin relief relative to guidance. The firm notes low valuation with 2027 enterprise value to EBITDA of approximately 11 times relative to intact double-digit percentage unit growth with solid cash-on-cash returns of around 30 percent.