Summer Vacation Replay – A Lesson from the Griswolds

Monday in the Goldman Guide we discussed our success with Travel Centers of America (NYSE – TA - $10.81).  I happened to be doing some flipping on the idiot box Monday night, and AMC appropriately started ‘Vacation’ week with the original 1983 ‘Vacation’, where Clark W. Griswold (Chevy Chase) drives his wife and two kids from Chicago to LA on a mission to get to Wally World.  Now, even though I have seen this movie countless times, I found myself enjoying bits and pieces of it again, and still laughing.  I think the movie, even though somewhat dated, endures the test of time because it strikes a nostalgic chord in a self deprecating way with so many of us.

So where are we going with this one?  Back in January we highlighted Denny’s (NASDAQ – DENN - $6.01) as a great buy with nice valuation, strong technical analysis, and expanding product lines and chains.  We hit a ‘grand slam’ with this one, as it is up almost 20% since, a nice steady climb. 

Denny’s is the classic breakfast stop for vacationers.  With the advent of the summer travels season this is one to keep on the BUY list.  Again, the technical analysis remains very bullish in the short-term, a positive sign that the momentum should continue.  Revenue and EPS growth remain solid as DENN beat on both for 1Q13, with estimates for $0.34 EPS for 2013 and $0.38 EPS for 2014.

Let’s face it, there will be many ‘Clark W Griswold and family’ trips to Denny’s over the next three months. While most experts agree travel will be up from last year, by no means are we in a travel boom and families will be looking for moderate ways to feed the family.  The seasonal revenue should aid the stock in 3Q13 earnings, which The Street will love.

We think the stock can climb to the $7 range by the end of the summer and $8 by the end of the year.

Have a great day.

Disclosure: Goldman Small Cap Research analysts are neither long nor short these shares but may elect to purchase the stock within the next 48 hours.

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