BUY OR SELL-Will Sonic shares recover in the near-term?

By Renju Jose

BANGALORE, May 28 (Reuters) - Shares of Sonic Corp (SONC.O: Quote, Profile, Research) have fallen 26 percent in the last six weeks, indicating a mostly negative market reaction to the drive-in restaurant chain's initiatives to boost sales and earnings.

Although some analysts consider the company's efforts to lure recession-weary customers to its stores as promising, others worry that Sonic's focus on happy-hour sales and the one-dollar menu could squeeze margins this year.

Oklahoma City-based Sonic's shares closed at $8.86 Wednesday on Nasdaq, down 54 percent from a high of $19.49 they touched a year earlier.

Three analysts rate Sonic shares "buy" or "outperform", while ten have a "hold" rating and four have an "underperform" rating, according to Reuters data. Price targets fall between $7.50 and $15.00.

So can investors bank on Sonic's shares with its sales promotions and refranchising efforts? Or will the company's mix-shift toward lower-margin products affect its performance in the current fiscal year?

THE THREE R'S

Sonic launched an "everyday value menu" in December 29 of last year, which offers a broad selection of one-dollar food, drink and dessert for the whole day.

"If you don't have a dollar-menu in the fast food sector, then you're likely losing market share right now," Stifel Nicolaus analyst Steve West told Reuters from St. Louis.