Goldman Sachs has upgraded its rating for Yum! Brands (YUM), the global fast-food giant behind iconic names like KFC, Taco Bell, and Pizza Hut, from “Neutral” to “Buy.”
This upgrade, accompanied by a maintained price target of $167, indicates a 16% upside for the stock.
The upgrade signals Goldman Sachs’ increasing confidence in Yum! Brands’ future growth trajectory and operational resilience.
Several key factors underpin this optimistic outlook, painting a picture of a company well-positioned to capitalize on evolving consumer trends and leverage its robust business model.
Robust unit growth and global expansion
A primary driver behind Goldman Sachs’ decision is Yum! Brands’ leading unit growth trajectory compared to its industry peers.
The company has consistently demonstrated its ability to expand its global footprint, with strong new store openings across various international markets.
This expansion translates directly into increased system sales and market share, providing a reliable avenue for sustained revenue growth even in a challenging economic environment.
The most recent first-quarter results for 2025 further reinforce this, showcasing 751 gross new units opened across 68 countries, contributing to a 5% worldwide system sales growth.
Goldman analyst Christine Cho said:
Further, management plans to triple Taco Bell’s international store footprint to 3,000+ stores by 2030E from 1,150 in 2024, with 40%+ contribution to new store growth from the brand’s Big 4 markets (UK, Spain, Australia, and India) and with plans to expand into markets like France, Poland, Germany, South Africa, Turkey, UAE, Greece, Ireland, and Sweden.
The power of the franchise model
Furthermore, Goldman Sachs highlights Yum!’s substantial franchise mix as a key factor contributing to its operational resilience.
With a vast majority of its restaurants being franchised, Yum! Brands benefit from a more stable and predictable revenue stream, primarily from royalties and fees, rather than being heavily exposed to the direct operational costs and capital expenditure associated with company-owned stores.
Cho said this asset-light model provides a degree of insulation from inflationary pressures and economic fluctuations, as the burden of day-to-day operations and initial investment largely falls on the franchisees.
Digital transformation and AI integration
Goldman Sachs is also impressed by Yum! Brands’ accelerated digital integration and technological advancements.
The company has made significant strides in enhancing its digital presence and capabilities, both at the individual brand level and across its enterprise.
The growth in digital sales, now approaching $9 billion annually, with a mix of approximately 55%, underscores the success of these initiatives.
Strong brand performance driving momentum
While some challenges persist, such as a recent decline in Pizza Hut’s system sales in the US and the impact of strategic closures in certain markets, the overall narrative is one of robust performance from its “twin growth engines”: Taco Bell U.S. and KFC International.
Taco Bell U.S. delivered a remarkable 9% same-store sales growth in Q1 2025, with KFC International also showing positive momentum and significant unit expansion.
These strong performances are seen as offsetting weaker areas and maintaining overall positive momentum.
The analyst added that:
“While YUM is certainly not immune from the low consumer debate and stepped up competition in the U.S. (i.e., its brands have above-peer skew towards the lower income strata), we highlight the history of strong Taco Bell outperformance during heated periods of value competition.”
Despite Goldman Sachs confidence on the stock, analysts are mostly divided on the stock. In the past 3 months, out of 20 analysts 15 gave a “hold” rating while 5 gave a “buy” rating.
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