Goldman Sachs initiated coverage of the restaurant sector in a note Thursday, prompting declines in the Jack in the Box (NASDAQ:JACK) and Wendy's (NASDAQ:WEN) share prices after assigning the stocks a Sell rating.
Wendy's is down 1%, while Jack in The Box has declined over 2% premarket.
Goldman Sachs said it has initiated research coverage of the Restaurant sector with a "selectively constructive view." Chipotle Mexican Grill (NYSE:CMG), Domino's Pizza (NYSE:DPZ), Restaurant Brands (NYSE:QSR), Starbucks (NASDAQ:SBUX), Sweetgreen (SG) and Shake Shack (NYSE:SHAK) were all assigned Buy ratings.
"We are less worried about a pullback in the restaurant spending or share of PCE given a still-healthy spending outlook and more lasting behavior shifts post-COVID (i.e., digital, convenience)," said analysts at Goldman Sachs.
"However, strong pricing tailwinds are beginning to fade and value competition is stepping up as we come out of the post-pandemic inflation surge," they add.
The bank believes traffic and unit growth will become an increasingly important part of the restaurants' growth equation, driving a bigger divergence across the peer set.