Cracker Barrel (CBRL) shares exploded higher on Wednesday morning after the restaurant chain posted a better-than-expected Q3 and raised its guidance for the full year.
The post-earnings momentum triggered a classic short squeeze that saw the trading volume hit 9.8 million — nearly 10x the company’s daily average, according to Yahoo Finance.
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At its intraday peak, Cracker Barrel stock was seen trading up a remarkable 80% year-to-date.
www.barchart.comWhat Drove Cracker Barrel Stock Higher Today
For its financial Q3, Tennessee-based Cracker Barrel posted an unexpected profit of $1.90 per share. Its revenue, at about $797 million, also came in handily above Street estimates.
In the release, management confirmed that a $47 million litigation settlement inflated Q3 numbers, adding that its recently completed corporate restructuring will generate up to $25 million in annualized savings.
Cracker Barrel now sees its adjusted EBITDA falling between $120 million and $125 million this year.
This guidance, more than anything else, reinforces that the firm’s turnaround narrative is gaining real traction — and CBRL shares are attractive to own at a price-to-sales (P/S) multiple of 0.22x.
Is It Too Late to Invest in CBRL Shares Already?
Heading into the quarterly print, about 27% of Cracker Barrel’s float was sold short — a level well above the 20% threshold generally considered exceptionally high.
As CBRL spiked on solid earnings, short sellers were forced to buy back stock to limit losses, piling more fuel onto an already surging share price.
Cracker Barrel shares ripped higher also because Wells Fargo upgraded them to “Overweight” and raised its price target to $50 on Wednesday morning.
Bulls, however, should note a key risk: the earnings beat was partly driven by a one-time litigation settlement, and traffic remained under pressure, falling about 6.7% in the third quarter.
Once short covering subsides, CBRL’s ability to hold gains will depend on whether the underlying business continues to improve.
How Wall Street Recommends Playing Cracker Barrel
Caution is warranted in playing CBRL stock also because much of the upside now looks priced in already.
According to Barchart, the consensus rating on Cracker Barrel is “Hold," with the mean price target of $33.60 indicating potential for a sharp decline from current levels.
www.barchart.com On the date of publication, Wajeeh Khan did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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