This week, Yum China's stock was a favorite among investors.
As reported by S&P Global Market Intelligence, the shares of restaurant chain operator Yum China Holdings (YUMC 0.17%) saw a nearly 10% increase in price this week. This rise was primarily due to upbeat quarterly results and subsequent analyst price target hikes, as well as a recommendation upgrade.
Boost in sales due to expansion plan
Yum China's positive trajectory began on Monday and continued throughout the week. On Monday, it revealed its third-quarter earnings, showing a 5% year-on-year increase in revenue to $3.07 billion, along with a more significant 19% rise in adjusted net income to $297 million ($0.77 per share). Both figures surpassed analyst estimates.
A significant portion of this improvement can be attributed to Yum China's expansion strategy. During the quarter, the company opened over 400 new restaurants, which more than offset a 3% decrease in same-store sales. As of September's end, it managed a total of 15,861 restaurants.
The company also highlighted its commitment to returning value to investors. It increased its share repurchases and dividend payouts by nearly threefold to $1.24 billion.
Growing optimism among analysts
With these positive financial results, several analysts tracking Yum China's shares became more optimistic about the company's future. Leading this surge was JPMorgan Chase, which raised its recommendation from neutral to overweight (equivalent to a buy), and increased its price target for the Hong Kong-listed stock from HK$35.50 ($4.57) to HK$60 ($7.72).
As per reports, analyst Kevin Yin at JPMorgan Chase stated that several sectors of the Chinese economy are merging, with a weaker economy causing smaller competitors to falter. As a result, Yum China, which is relatively strong, is likely to continue to benefit from this trend.
Following the publication of Yum China's impressive third-quarter earnings, many financial analysts started investing in the company's shares. The optimism was fueled by JPMorgan Chase, which raised its recommendation from neutral to overweight, and increased its price target from HK$35.50 to HK$60, demonstrating a strong confidence in Yum China's future financial growth.
In light of these positive financial developments and analyst predictions, smart investors are looking to capitalize on this opportunity, investing their money in Yum China shares, as they anticipate further financial gains for the company.
