Cramer says three restaurant stocks can outperform as Covid fears rise

CNBC’s Jim Cramer on Monday recommended three restaurant stocks investors can play as Covid-19 transmission rates in the U.S. swing upward.

Cramer said he’s bullish on the stocks of Starbucks, McDonald’s and Yum Brands — the parent of KFC, Pizza Hut, Taco Bell and other chains — if consumers begin to grow weary of dining out again, endorsing chart analysis from ExplosiveOptions.net founder Bob Lang.

“Last week, some of the biggest restaurant names exploded higher and the charts, as interpreted by Bob Lang, suggest that they’ve got more room to run,” the “Mad Money” host said. “These stocks are exactly what you want to own if the great reopening is hitting a delta variant-induced snag.”

While he thinks it’s unlikely that widespread industry restrictions and shutdowns would go back into effect, Cramer portends that the spread of the delta, now the dominant form of the disease in the U.S., could dampen the outlook for many restaurants.

Lang, who is also a colleague of Cramer at TheStreet.com, spotted bullish trading patterns in all three of the stock picks.

According to Cramer, Lang has a $270 price target on McDonald’s. He also set targets of as high as $140 for Starbucks and Yum Brands apiece.

McDonald’s and Starbucks’ targets assume about 11% upside from Monday’s close. Yum Brands’ target represents a more than 13% gain from its closing price.

Starbucks, McDonald’s and Yum Brands joins Chipotle and Domino’s on Cramer’s list of what he deemed to be “last man standing” eateries. Those companies’ big investments in technology and digital ordering have bode well in both a lockdown environment and beyond, Cramer said.

“The restaurant stocks that will do the best with a renewed Covid outbreak are the same ones that are already doing great this earnings season,” he said.

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