On Friday, Red Robin Gourmet Burgers (NASDAQ:RRGB), currently trading at $6.28, saw its price target increased by Craig-Hallum following a period of notable performance improvements. The new target is set at $10.00, up from the previous $8.50, with a reiterated Buy rating on the stock. According to InvestingPro data, analyst targets range from $6.00 to $11.00, suggesting potential upside from current levels.
The adjustment comes after Red Robin reported robust preliminary results for the fourth quarter. Analysts from Craig-Hallum expressed optimism for the stock's potential in the first half of 2025, citing a substantial acceleration in same-store sales (SSS), which they attribute to an enhanced loyalty program and effective marketing strategies. However, InvestingPro analysis indicates the company faces challenges with a weak financial health score of 1.68 out of 5, primarily due to significant debt burden and cash burn rates.
During the fourth quarter, Red Robin observed a significant uptick in customer traffic, which, despite remaining negative, showed a marked improvement of over 500 basis points from the first quarter levels. The loyalty program was particularly successful in attracting both new and returning customers to the restaurants.
The positive trend appears to have continued into January, with data indicating that same-store sales are tracking well above initial estimates for the first quarter. Analysts highlighted that Red Robin's improved value offerings and strong guest experience scores are likely to sustain the improved results. For deeper insights into Red Robin's performance metrics and future outlook, investors can access comprehensive analysis through InvestingPro's detailed research reports, which cover over 1,400 US stocks.
The leverage in Red Robin's earnings model was also noted as a factor that could potentially lead to a powerful rally in the company's stock, though investors should note the company's total debt of $594.5 million and current ratio of 0.44. The analyst team at Craig-Hallum stands by their Buy rating and supports the revised price target, reflecting their confidence in the ongoing momentum and future prospects of Red Robin Gourmet Burgers.
In other recent news, Red Robin Gourmet Burgers reported Q3 results, with solid same-store sales and total sales, but faced higher than expected labor costs and administrative expenses, leading to weaker margins. The company has maintained its sales guidance for fiscal year 2025, but revised its adjusted EBITDA guidance downward due to anticipated continued margin pressures. In an effort to address this, management plans to improve operations at approximately 70 locations that are only profitable on an EBITDAR basis.
Craig-Hallum analysts, while maintaining a Buy rating, adjusted the price target from the previous $11.50 to $8.50, citing these margin struggles. They also noted the potential for activist investors to push for more significant changes to enhance company-wide restaurant-level margins.
In other developments, Red Robin reported mixed second-quarter financial results, with revenue reaching $300 million, slightly surpassing expectations, but recording an adjusted loss per share of $0.47, missing analyst estimates. The forecast for fiscal year 2024 was revised, now expecting adjusted EBITDA to be between $40 million and $45 million, and total revenue of approximately $1.25 billion. Additionally, the company's Chief Technology Officer, Jyoti Lynch, has resigned.
Red Robin also amended its credit agreement, increasing its revolving credit facility, extending the maturity, and providing some covenant relief. Analysts at Craig-Hallum and Benchmark have maintained a Buy rating on the stock, despite lowered price targets due to increasing food costs, labor expenses, and broader industry pressures.
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