Yum China Shares Downgraded To Neutral At Goldman After Sharp Price Gains

By Ciara LinnaneMarketsMarketWatch Pulse

Goldman Sachs downgraded Yum China Holdings stock on Friday, and said it sees limited upside as the stock has gained 22% since the company reported earnings on April 6. The S&P 500 has gained just 2% in the same period, the bank wrote in a note. Analyst Michelle Cheng said she is still positive on margins, but the market is pricing in a roughly 2% rise in same-store sales growth in 2017, while Goldman is expecting growth of just 1%. "Our sensitivity analysis also suggests a 2 percentage point increase in 2018 same-store sales growth vs. Goldman Sachs estimate would result in an implied value that is only about 5% higher than the current share price," Cheng wrote. "As such, we downgrade the stock to Neutral from Buy, with an unchanged target price, and await a better re-entry point." Yum China shares have gained 32% in 2017, while the S&P 500 has gained 6.7%.

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