Key Takeaways
- Casey’s General Stores could be well-positioned to expand and relatively insulated from tariffs and an economic downturn, KeyBanc analysts said in a recent research note.
- KeyBanc initiated coverage of Casey’s General Stores with an “overweight” rating and $500 price target Thursday, suggesting 9% upside from Friday’s close.
- Shares added over 4% Friday amid broader market gains and have risen nearly 50% over the past year.
Casey’s General Stores (CASY) has gained another bull.
KeyBanc Capital Markets on Thursday initiated coverage of the Iowa-based gas station and convenience store chain at “overweight” with a $500 price target. It is the highest of the five current price targets tracked by Visible Alpha, which has a consensus of $468.50.
Casey’s General Stores shares added over 4% Friday to close at $457.25 amid broader market gains. They have risen nearly 50% over the past year.
KeyBanc analysts wrote that Casey’s may scoop up more competitors—it has acquired nearly 470 stores in the past five years—and bolster their sales by introducing pizza and prepared foods. “Looking forward, we see balanced growth driven from organic store openings, small acquisitions … and (at a store level) from its investments in its food innovation pipeline,” the analysts said.
Convenience Store Sector ‘Has Little Direct Tariff Risk,’ KeyBanc Says
The convenience store industry, which KeyBanc estimates generated 2024 sales of $825 billion, “has little direct tariff risk,” it said. But the field is also fragmented and ripe for consolidation, with KeyBanc estimating 75% of chains may go out of business or be acquired by competitors.
Much of the sales growth in the gas station sector has come in recent years from snacks, drinks, tobacco and items sold inside convenience stores, KeyBanc said, adding that this is Casey’s strength. The company is the fifth-largest pizza chain in the U.S. and growing, analysts said.
“Despite being a convenience store and operating in rural and lower-population markets, Casey’s prepared food business produces impressive volume, with (average unit volume) better than Subway,” the note said, adding: “Its food innovation pipeline is also gaining sophistication and should drive comp growth.”
With pizza prices $1 or $2 below competitors, Casey’s may draw in customers looking for value, the analysts said. CEO Darren Rebelez said Casey’s wants to make inroads with people looking to save and has seen recently seen customers pick baked goods over high-priced candy.
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