Darden Restaurants price target boosted on Olive Garden turnaround optimism

Jefferies analysts raised their price target for Darden Restaurants to $210 from $165, citing renewed confidence in Olive Garden's ability to increase traffic through its 'Every Day Affordable Price' strategy and recent promotional efforts like the 'Buy One Take One' offer, which drove a 600 basis point acceleration in foot traffic quarter-over-quarter. The analysts increased their same-store sales forecast for Olive Garden in fiscal 2026 to 3% from 2%, and expect 4% same-store sales growth in fiscal Q4 2025. Despite the optimism, Jefferies maintained a 'Hold' rating on the stock due to its rich valuation and muted unit growth.

Analysis

Jefferies analysts have increased their price target for Darden Restaurants (NYSE:DRI) to $210 from $165, reflecting increased optimism regarding the turnaround at its Olive Garden brand. This confidence is rooted in Olive Garden's strategic shift towards an 'Every Day Affordable Price' (EDAP) model and successful promotional activities, such as the 'Buy One Take One' offer, which reportedly accelerated foot traffic by 600 basis points quarter-over-quarter. Analysts anticipate these efforts will contribute to a solid fiscal fourth-quarter earnings report on June 20 and have consequently raised their same-store sales growth forecast for Olive Garden to 4% for fiscal Q4 2025 and to 3% for fiscal 2026, up from a previous 2% estimate. Despite these positive operational developments and signs that strategies like adjusted limited-time offers and Uber Direct delivery investments are yielding results, Jefferies maintained a 'Hold' rating on DRI. This cautious stance is attributed to the stock's current 'rich' valuation, with shares trading at $217, above the new price target and historical valuation levels, and Darden's overall muted unit growth profile, where acquisitions have not yet significantly accelerated expansion. The analysts note that recent traffic improvements appear to be well-reflected in the current stock price.

Key Decisions for Investors

• Investors should acknowledge the positive operational momentum and traffic recovery at Olive Garden, but remain cognizant of Darden's current valuation, which Jefferies deems 'rich' with the stock trading above the new $210 price target.
• Closely monitor Darden's upcoming fiscal fourth-quarter earnings on June 20 for confirmation of the reported 600 basis point foot traffic acceleration, margin performance under the EDAP strategy, and any commentary on future unit growth acceleration.
• Given the 'Hold' rating and valuation concerns despite operational improvements, consider if the current share price adequately reflects the near-term positives, and evaluate risk-reward, as significant upside may be limited until there is evidence of more substantial unit growth or a more favorable valuation.