Shares of Darden fell by nearly 5 percent on Monday after an analyst warned that the market was underappreciating how much inflation would drive up costs for the owner of the Olive Garden chain of restaurants.
Evercore ISI Analyst David Palmer cut his rating to “In-Line” from “Outperform” and dropped his price target to $155 from $165.
Shares were trading around $137 on. Monda,.
“We believe the market largely appreciates the benefits of Darden coming out of the pandemic and cost pressures will dampen the fiscal year outlook towards the middle of the guidance range,” Palmer wrote.
Palmer argued that the market was underestimating the higher costs that the company will face in the months ahead. A tight labor market will push wages higher and food prices are likely to climb, according to Palmer, Evercore ISI’s top restaurant analyst.
Despite the sell-0ff, shares are up 18.5 percent year to date.
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