Investors are cheering Cracker Barrel (CBRL) shares on Wednesday after the American restaurant chain confirmed plans of reverting to its old logo.
The announcement arrives on the heels of fierce criticism over the company’s redesigned logo that ultimately prompted President Donald Trump to urge CBRL to reinstate its original logo.
Despite today’s gain, Cracker Barrel stock is down more than 13% versus its year-to-date high set on July 23.
Is Going Back to the Old Logo Really a Positive for CBRL Stock?
According to Americus Reed, the professor of marketing at the Wharton School, going back to the old logo signals two things, neither of which paints a particularly rosy picture of the management at CBRL.
“One is you don’t really know what you’re doing as a marketer. And two, you’re willing to fly by the wind,” he said in a recent interview with CNBC.
While Cracker Barrel shares sit comfortably in the green at the time of writing, Reed warned the walkback could undermine the brand’s credibility in the long run.
However, the marketing expert also agreed that the firm’s redesigned logo was a textbook marketing blunder to begin with.
Why Cracker Barrel Shares Remain Unattractive to Own
While going back to the old logo is helping CBRL stock reclaim some of its recently lost ground, for long-term investors, it remains an unattractive pick for several reasons.
For starters, the restaurant chain is grappling with shrinking earnings. In its current fiscal quarter, Cracker Barrel is expected to record $0.78 of per-share profit, down significantly from $0.98 a year ego.
Plus, CBRL shares are currently trading at a price-sales (P/S) ratio of more than 15x, far above the industry average.
In short, Cracker Barrel stock faces weak traffic trends, margin pressure, and rather limited growth catalysts, making it fundamentally unattractive despite short-term sentiment-driven gains today.
Wall Street Recommends Caution on Cracker Barrel Stock
Note that Wall Street analysts also recommend caution in buying Cracker Barrel shares at current levels.
According to Barchart, the consensus rating on CBRL stock currently sits at “Hold” only with the mean target of roughly $58 indicating potential downside of about 6.5% from here.
