Regulatory Pressures And Shifting Diets Will Undermine Menu Appeal

Key Takeaways

• Reliance on fried, processed foods and a weak pivot to health trends could erode relevance, reduce sales, and slow global revenue growth.
  
• Heightened regulation, climate risk, supply chain pressures, and overdependence on the Philippine market threaten profitability and the success of international expansion.
  
• Store expansion, brand integration, digital upgrades, and effective franchising collectively drive scalable growth, margin improvement, and long-term profitability amid diverse global markets.

Catalysts

Develops, operates, and franchises quick service restaurants.

• As health and wellness trends accelerate globally, there is a real risk that Jollibee's product offerings-which remain centered on fried and processed foods-will lose relevance, leading to slowing transaction growth, reduced same-store sales, and eventual stagnation or decline in top-line revenues.
  
• Intensifying regulatory scrutiny around nutritional content, food advertising to children, and stricter sustainability requirements will raise compliance costs and constrain future marketing flexibility, placing persistent pressure on net margins and limiting profitability in key markets.
  
• The shift toward plant-based and alternative protein diets, especially among younger demographics in rapidly urbanizing regions, threatens to erode market share and diminish Jollibee's long-term revenue growth unless the company can successfully pivot its core menu-a complex, costly transition that could drag on earnings for years.
  
• Ongoing climate change volatility and global supply chain disruptions are likely to drive unpredictable inflation in input costs, forcing Jollibee to either absorb margin pressures or risk alienating price-sensitive consumers through repeated menu price hikes, severely undermining operational efficiency and margin stability.
  
• The company's continued dependence on the Philippine market as the critical profit contributor leaves group earnings exposed to any economic downturn or peso volatility, while the challenges of integrating recent overseas acquisitions (such as Compose, Tim Ho Wan, and Smashburger) carry the risk of persistent underperformance, dilution of net profit, and failed international expansion.

Jollibee Foods Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more pessimistic perspective on Jollibee Foods compared to the consensus, based on a Fair Value that aligns with the bearish cohort of analysts.
• The bearish analysts are assuming Jollibee Foods's revenue will grow by 6.8% annually over the next 3 years.
• The bearish analysts assume that profit margins will shrink from 3.5% today to 3.4% in 3 years time.
• The bearish analysts expect earnings to reach ₱11.4 billion (and earnings per share of ₱10.2) by about August 2028, up from ₱9.7 billion today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bearish analyst cohort, the company would need to trade at a PE ratio of 29.7x on those 2028 earnings, up from 25.7x today. This future PE is greater than the current PE for the PH Hospitality industry at 11.3x.
• Analysts expect the number of shares outstanding to decline by 0.12% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 15.26%, as per the Simply Wall St company report.

Jollibee Foods Future Earnings Per Share Growth

Risks

• Strong double-digit system-wide sales and same-store sales growth across both domestic and international markets, especially in the Philippines and EMEA region, indicate sustained demand and ongoing store expansion efforts that could drive top-line revenue higher over the long term.
  
• Ongoing successful integration of acquired brands such as Tim Ho Wan and Compose Coffee, along with strong performance from the Coffee and Tea segment despite commodity price pressures, suggests earnings and net margins may improve as these segments scale and deliver synergies.
  
• Jollibee's increasing focus on digital transformation, including a rapidly growing loyalty program and operational enhancements such as inventory management and menu optimization, is likely to boost customer frequency, average transaction size, and overall profitability.
  
• Expanding international franchising pipeline, particularly in North America where franchisee interest is rising despite macroeconomic headwinds, provides a mechanism for scalable growth, reduced capital intensity, and a broader earnings base as royalty and franchise fees accumulate.
  
• Prudent financial management, evidenced by resilient cash flows, proactive interest expense reduction, and highly successful refinancing of debt facilities, positions the company well to support ongoing growth initiatives and maintain or even improve net margins over the long term.

Valuation

• The assumed bearish price target for Jollibee Foods is ₱197.75, which represents two standard deviations below the consensus price target of ₱287.82. This valuation is based on what can be assumed as the expectations of Jollibee Foods's future earnings growth, profit margins and other risk factors from analysts on the more bearish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of ₱330.0, and the most bearish reporting a price target of just ₱192.0.
  
• In order for you to agree with the bearish analysts, you'd need to believe that by 2028, revenues will be ₱339.3 billion, earnings will come to ₱11.4 billion, and it would be trading on a PE ratio of 29.7x, assuming you use a discount rate of 15.3%.
  
• Given the current share price of ₱222.4, the bearish analyst price target of ₱197.75 is 12.5% lower. Despite analysts expecting the underlying buisness to improve, they seem to believe the market's expectations are too high.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.