RESEARCH ALERT-Piper Jaffray cuts Panera Bread, Sonic Corp

Mon Jul 16, 2012 10:33am EDT

* Cuts Panera to "underweight" from "overweight"

* Cuts Sonic Corp to "neutral" from "overweight"

* Cuts Panera price target to $129 from $165

* Panera shares down as much as 3 pct, Sonic falls 6 pct

July 16 (Reuters) - Piper Jaffray downgraded restaurant chain Panera Bread Co by two notches citing increased risk in the execution of its plans due to recent management transitions, sending its shares down as much as 3 percent.

The brokerage also downgraded drive-in restaurant chain Sonic Corp to "neutral" from "overweight" on valuation concerns. Sonic shares fell 6 percent to $9.88 on the Nasdaq on Monday morning.

Panera has been undergoing a reshuffle at its top recently. In April, it appointed an interim chief financial officer and also named a new chief operating officer. In March, it announced Bill Moreton and Ron Shaich would become Co-CEOs.

The brokerage, which cut its rating on Panera to "underweight" from "overweight", said it sees "a high degree of execution risks until executive positions are filled."

Piper Jaffray also cut its price target on the company's stock to $129 from $165, but conceded its downgrade may be construed as "contrarian" given Panera's strong balance sheet, positive same-store sales trends and a healthy unit growth.

"In the short-term we do very strongly believe our full-year 2012 estimates remain achievable," analyst Nicole Regan wrote in a client note.

However, Regan said she had reduced confidence about the company's future due to a number of long-term factors including its product mix and comparable sales trends, besides the overall strategic and tactical execution risks.

For Sonic, Regan said an eventual return to unit growth could be the next catalyst that will drive its shares higher.

Shares of the St. Louis-based Panera, one of the restaurant industry's best performing companies, fell as much as 3 percent to $143.60 on the Nasdaq.

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