The Cheesecake Factory Incorporated (CAKE): A Bull Case Theory

We came across a bullish thesis on The Cheesecake Factory Incorporated on Stock Picker's Journey’s Substack by Gregg Jahnke. In this article, we will summarize the bulls’ thesis on CAKE. The Cheesecake Factory Incorporated's share was trading at $49.15 as of December 16th. CAKE’s trailing and forward P/E were 14.94 and 12.29 respectively according to Yahoo Finance.

The Cheesecake Factory Incorporated operates and licenses restaurants in the United States and Canada. CAKE, led by founder’s son David Overton, has navigated a challenging restaurant industry successfully over the past decade, yet its stock has underperformed the S&P 500 by nearly 300%, largely due to excessive valuations a decade ago when it was a favorite among growth investors.

Despite this, CAKE remains an understandable and well-run business, making it appealing in a mid-cap value portfolio where at least one restaurant stock is often warranted. The company is projected to earn $4.00 per share in 2026 and conservatively $5.00 by 2030; applying a 15x multiple suggests a potential target of $75, modestly above its current $50 stock price, with a 2% dividend yield.

While upside may be limited under base assumptions, the story carries low risk: net debt is only around 1x EBITDA, and the stock trades near the midpoint of its $30–$70 range. Analyst sentiment is tepid, with 9 buys, 7 holds, and 4 sells, reflecting market caution. A key potential misperception lies in CAKE’s incubator brands, North Italia and Flower Child, which have not yet delivered standout performance but could surprise if one gains traction.

Off-premises sales, driven by DoorDash, account for 21% of revenue, and dessert sales remain steady at 17%, while the new Bites and Bowls menu shows promising adoption. Founder Overton retains about 5% ownership, and value investor Ron Baron holds 2.5%, suggesting alignment with long-term shareholders. Overall, CAKE offers a stable, understandable business with modest growth potential, limited downside, and a latent upside catalyst in its incubator concepts, making it a cautious yet intriguing consideration for investors seeking exposure to the casual dining sector.

Previously we covered a bullish thesis on The Cheesecake Factory Incorporated (CAKE) by TyNads in May 2025, which highlighted its transformation into a multi-brand platform, stable profitability, and underappreciated growth assets like North Italia and Flower Child. The stock has depreciated approximately by 1% since coverage. The thesis still stands as CAKE maintains strong cash flow and growth potential. Gregg Jahnke shares a similar perspective but emphasizes historical undervaluation and potential upside from off-premises sales and menu innovations.

The Cheesecake Factory Incorporated is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 28 hedge fund portfolios held CAKE at the end of the third quarter which was 22 in the previous quarter. While we acknowledge the potential of CAKE as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

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Disclosure: None.