Investing.com -- TD Cowen downgraded Restaurant Brands International (NYSE:QSR) to Hold from Buy, citing valuation concerns and increasing risks to its Burger King and Tim Hortons brands.
The firm believes shares are "stuck in the penalty box" following a recent stock bounce, with limited near-term upside.
“We view shares as fairly valued,” TD Cowen stated, highlighting multiple challenges.
For Burger King, the firm lowered its 2025 same-store sales forecast to 1.6% from 2.4%, now below the 2.1% consensus estimate.
“Deteriorating value perceptions” relative to competitors could weigh on performance, says the bank, especially as the quick-service sector leans into aggressive chicken-focused menu innovation.
Additionally, they note that Burger King is searching for a new Chief Marketing Officer, creating further uncertainty.
For Tim Hortons, TD Cowen flagged new Canadian consumer risks that could pressure sales. The firm pointed to immigration reforms expected to reduce Canada’s workforce by ~1% annually in 2025-26, and pending 25% tariffs that could hurt discretionary spending and consumer confidence.
“Management cited this is already impacting the consumer psyche,” the note added.
Meanwhile, TD Cowen pushed back expectations for 5%+ net restaurant growth to 2027, mentioning delays in key markets.
The dispute with Burger King’s China franchisee is expected to be resolved soon but remains a 100 basis point headwind. Additionally, geopolitical uncertainty in the Middle East continues to pose a 50 basis point drag on development, says TD Cowen.
Given these factors, TD Cowen sees limited upside for QSR shares, with a price target of $70. The firm cautioned that if development trails expectations, “this could put a ceiling on shares’ multiple.”