Shares of pizza restaurant chain Papa John’s (PZZA) are surging in today’s trading amid speculation that it may receive a takeover offer from Restaurant Brands (QSR), which is the owner of Burger King and Tim Hortons.
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The rumors started after a jet owned by 3G Capital was spotted in Louisville on August 15, according to a note from Gordon Haskett’s Don Bilson. 3G Capital is an investment firm that is also a major QSR shareholder, and Louisville is where Papa John’s is headquartered.
Although neither company has confirmed or denied these claims, it would make a lot of sense to add Papa John’s to Restaurant Brands’ portfolio, which already owns Tim Horton’s, Burger King, Popeyes, and Firehouse Subs. In fact, Tim Horton’s recently added pizza to its menu, although it only makes up a very small portion of its menu. Nevertheless, it shows that the company has been interested in moving toward pizza sales.
Hedge Funds Are Increasing Their PZZA Holdings
It seems like 3G Capital isn’t the only investment firm that may be interested in PZZA stock. In fact, hedge funds increased their holdings by 77,200 shares in the past quarter. As a result, they have a very positive confidence signal, as indicated by the graphic below. This recent interest from institutional investors could indicate that they believe the stock is undervalued, especially since it has been steadily downtrending for over three years and has a reasonable P/E ratio of 21.9.
Is PZZA Stock a Buy?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on PZZA stock based on five Buys, seven Holds, and zero Sells assigned in the past three months. After a 33% decline in its share price over the past year, the average PZZA price target of $52.67 per share implies 5.28% upside potential.
