On Thursday, Kura Sushi USA Inc . (NASDAQ:KRUS) received an updated price target from Craig-Hallum, reflecting confidence in the restaurant chain's recent performance and growth potential. The firm increased its price target on the stock to $120 from the previous $85, while reaffirming a Buy rating.
The upgrade comes after Kura Sushi reported significant improvements in same-store sales (SSS) during the second half of July through August, with the positive trend extending into fiscal year 2025.
Despite the company's cautious approach to FY25 guidance, which was set below expectations, the analyst highlighted Kura's steady path toward another year of over 20% unit growth. The potential for this growth to surpass initial forecasts was also noted.
The company's planned general and administrative (G&A) expense leverage for FY25 is nearly 100 basis points, which is particularly notable given the modest implied comparable sales results. This operational efficiency is part of the reason for the analyst's positive outlook, despite a 10% drop in the stock's value in after-hours trading following the sales guidance announcement.
The analyst expressed admiration for the management team's ability to maintain over 20% restaurant-level margins amid sluggish sales, attributing this to a relentless focus on operational improvements. Recent successful openings in smaller markets have led to the belief that Kura Sushi could potentially surpass the long-term target of approximately 500 locations.
Craig-Hallum's stance is that investors should take advantage of any price dips in Kura Sushi's stock, considering it the best growth story in the restaurant sector. The firm's reiteration of the Buy rating and the raised price target to $120 underscores this sentiment.
In other recent news, Kura Sushi USA Inc. has seen a positive adjustment in its stock price targets by two analyst firms following its strong fiscal fourth quarter 2024 results.
Benchmark raised its target from $90 to $115 while maintaining a buy rating, and Piper Sandler increased its target from $63 to $98, continuing with a neutral stance. Kura Sushi's quarterly revenues reached $66 million, surpassing the predicted $64 million, due to better-than-expected same-store sales and efficient cost management.
The company also outperformed estimates in its adjusted earnings per share and adjusted earnings before interest, taxes, depreciation, and amortization. This strong performance has continued into the first quarter of the fiscal year 2025, according to the company's management. In addition to these financial highlights, Kura Sushi provided revenue guidance for FY2025e, projecting a range between $275 million and $279 million.
To further support its growth, Kura Sushi plans to open 14 new units in the current fiscal year, aiming for a growth boost of over 20%. The company also expects its general and administrative expenses for FY2025e to be approximately 13.5% of sales, indicating continued leverage in this area.
InvestingPro Insights
Kura Sushi USA Inc. (NASDAQ:KRUS) has shown impressive financial performance, aligning with Craig-Hallum's optimistic outlook. According to InvestingPro data, the company's revenue growth stands at a robust 26.91% over the last twelve months as of Q4 2024, with quarterly revenue growth at 20.18%. This strong growth trajectory supports the analyst's positive stance on the company's expansion potential.
InvestingPro Tips highlight that analysts anticipate sales growth in the current year, which corroborates Craig-Hallum's expectations for continued unit growth. Additionally, the company has demonstrated a strong return over the last month and three months, with price total returns of 27.14% and 92.38% respectively, indicating positive market sentiment.
However, investors should note that Kura Sushi is currently trading at high valuation multiples, including EBITDA and revenue multiples, as pointed out by InvestingPro Tips. This suggests that the market has already priced in significant growth expectations, which aligns with Craig-Hallum's recommendation to buy on potential dips.
For readers interested in a more comprehensive analysis, InvestingPro offers 13 additional tips for Kura Sushi, providing a deeper understanding of the company's financial health and market position.
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