Activist fund Starboard sees opportunities in restaurant space

Jeff Smith, who runs activist fund Starboard Value, sees opportunities in the restaurant space.

“We do think there are really good opportunities in the restaurant space,” Smith said in an interview on CNBC on Tuesday. “The restaurant space in general can be cheap and may have overreacted.”

Starboard has previously been involved in a proxy fight with Darden Restaurants (DRI), which owns the Olive Garden chain, where the activist replaced the company’s entire board. The fund has previously run an activist campaign with pizza chain Papa John’s (PZZA).

“There are interesting opportunities, and we’ll see,” Smith added. “It depends whether things come into our strike zone.”

Separately, Smith, who is one of several activist investors in Salesforce (CRM), said he believes shares of the customer relationship management firm could reach over $300 a share if it can get its margins to improve. Salesforce stock has gained 54% since Starboard’s stake was announced in October.

“There is still more to be done, and I think they would agree,” Smith said. “Mostly on margins.”

“There’s still another 1,000 basis points of opportunity, but we expect they can get there,” Smith added. “We think there’s another 500 plus basis points of margin opportunity, and we also think there’s another 500 plus basis points of growth. We are very very excited. If they can do that, we think it’s probably $15 a share in free cash flow in the next couple of years. We think that means the stock should be over $300 a share. It’s still undervalued.”

Starboard’s Smith also discussed his stake in Splunk (SPLK).

“We love Splunk,” Smith told CNBC. “We think Splunk is very very similar to Salesforce, just slightly behind in their execution. But it’s a similar opportunity because it was a company that was not focused on profit margins, but instead just focused on growth, and now they are focused on a balance of revenue growth and profitability, but with that focus, we think they can almost double their free cash flow per share in the next couple of years.”

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