NEW YORK (TheStreet) -- Shares of Bojangles (BOJA) are down in afternoon trading after multiple analysts initiated coverage of the stock following its initial public offering on May 8. Opinions differed on whether a premium valuation is justified, but analysts were largely confident in the company's fundamental growth potential.
WHAT'S NEW: Stephens' Will Slabaugh initiated coverage of Bojangles with a $26 price target and an Equal Weight rating. Slabaugh says he believes the company's restaurant buildout is less risky than many of its competitors, and he also praises the company's unique "all day breakfast" policy and iconic status in core markets. Slabaugh notes that as the company expands outside of its North and South Carolina base, unit economics could potentially deteriorate as new locations may not enjoy the same level of built-in brand awareness. Piper Jaffray's Nicole Regan started coverage of Bojangles with a Neutral rating and a $27 price target, explaining that the rating is due to the belief that other companies simply present more upside potential. That being said, Regan has "every confidence" the company is excellently positioned to realize its growth targets. The analyst remarks that the company's 60-40 split of company owned versus franchised locations offers both de-risking and high-margin loyalties, but notes that the market "has shown preference" for concepts that are primarily one or the other. Regan also remarks that Bojangles' commodity concentration in chicken presents a possible risk. Meanwhile, Jefferies' Andy Barish initiated with a Buy rating and a $32 target, citing a strong breakfast offering and regional growth throughout the Southeast as "key attributes" for the company. KeyBanc's Christopher O'Cull and David Carlson also initiated coverage with a $32 price target and give the stock an Overweight rating. The analysts say a premium valuation is warranted, and praise the company's broad demographic appeal and significant potential for unit growth.