Share prices for three of Australia's major fast food operators have all been under pressure in recent months, with the analysts at Morgans saying this means it could be a good time to buy.
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Consumers looking for quality
In a research note distributed to clients this week, the broker said it had done extensive market research, as well as its own consumer survey, which indicated that more than half of consumers cited food quality and taste as the most important factors affecting which fast food they bought, with only a small number citing cost as the primary issue.
The research also indicates that the sector has an opportunity to capitalise on changing consumer trends.
As Morgans said in its research note:
As alcohol consumption falls sharply among younger Australians, discretionary capacity is migrating toward food experiences that meet a quality threshold. Nearly six in ten Gen Z diners expect to spend more on eating out in 2026 than in 2025, making them the most growth-oriented dining cohort in the market.
All three of the companies analysed by Morgans have a buy rating, so without further ado, let's have a look at what they're saying.
Guzman Y Gomez Ltd (ASX: GYG)
Morgans said Guzman Y Gomez is in favour because of its high-quality, health-led proposition.
They added:
This supports structural long-term growth. Material earnings growth is well supported by daypart expansion, strong unit economics, a large white space opportunity and operating leverage, with the pace of US loss narrowing the key variable to monitor.
Morgans has a price target of $26.70 on Guzman Y Gomez shares compared with $17.14 currently.
Guzman Y Gomez is among the most-shorted stocks on the ASX.
Collins Foods Ltd (ASX: CKF)
The KFC and Taco Bell operator is a "defensive compounder", Morgans says, having a cash-generative business, "with a management team set to navigate a difficult macroeconomic backdrop, and a value proposition that makes it a natural beneficiary of casual dining trade-down''.
Morgans said the German growth pipeline was effectively unpriced at current levels, "and the valuation is undemanding".
Morgans has a price target of $12.50 on Collins Foods shares compared with $8.02 currently.
Colins Foods is valued at $935.6 million.
Domino's Pizza Enterprises Ltd (ASX: DMP)
Morgans said Domino's had been an unintentional case study for the sector by training customers to expect discounts, eroding the pricing power needed to maintain franchisee profitability.
The broker said Domino's is now a turnaround story, with strong foundations and a solid management team.
They added:
However, we require consecutive results showing improved EBIT margins and evidence of returning franchisee profitability without further top-line deterioration before full conviction is warranted. We view their value proposition as weaker than peers.
Morgans has a price target of $25 on Domino's shares compared with $15.63 currently.
