Investors in the restaurant sector have a challenge in the year ahead after a challenging backdrop in 2025 led to share price underperformance. The general view is that a focus on brands with pricing power, higher-income exposure, and disciplined cost control will be strategic, as traffic and margins remain uneven but food and commodity price pressures gradually ease.
Oppenheimer called Chipotle (CMG) its top restaurant sector pick for 2026 after its brutal share price slide in 2025. Analyst Brian Bittner believes that the bear camp on the fast-casual restaurant stock does not appreciate the path for accelerating share gains and overemphasizes same-store sales risks against so-called tough comparisons.
The firm also upgraded McDonald’s (MCD) to an Outperform rating on its view that the fast-food giant is set up for investors as a golden opportunity for a breakout. Bittner noted that pushback will center on health trends, but McDonald’s (MCD) management’s work to reposition value perception and create a catalytic innovation pipeline is seen as enabling a powerful setup. “We anticipate a revitalized EPS equation in ’26E/’27E following 2+ years of disappointments, with optionality if lowend consumer recovers at any point,” updated Bittner.
For its part, UBS sees a more constructive backdrop for the U.S. restaurant sector entering 2026 after a difficult 2025, expecting upside from federal stimulus, easier year-over-year comparisons, and discounted valuations. The firm anticipates modest industry same-store sales growth in the low-single digits, aided by stimulus-driven demand and stabilizing macro conditions, though it cautions that consumer headwinds among lower-income, younger, and Hispanic demographics could still weigh on traffic, particularly in the second half.
Analyst Dennis Geiger and his team think value-driven promotions and competitive discounting will remain widespread given limited room for price increases, with a resulting focus on traffic share and differentiated sales catalysts across brands. Margins should improve broadly on easier comparisons and steady sales gains, though reduced pricing power and mild food inflation may temper the recovery.
In general, UBS views fast-casual restaurants as poised for recovery after 2025’s sharp slowdown, seeing prior weakness as cyclical rather than structural and supported by easier comparisons, stimulus tailwinds, and improved consumer sentiment. Casual dining chains with strong value propositions are expected to sustain market share gains, while quick-service restaurants are likely to stay polarized between scale leaders and smaller brands struggling with low-income exposure and GLP-1 weight-loss drug concerns. The firm upgraded Brinker International (EAT) to Buy from Neutral, raising its target to $175, while downgrading Sweetgreen (SG) to Neutral with a $7.50 target amid ongoing margin and valuation pressures. Top stock picks remain Dutch Bros (BROS), favored for growth and traffic momentum, and Chipotle (CMG), supported by long-term unit growth and an expected same-store sales inflection in 2026.