On Monday, Piper Sandler adjusted its outlook on Wingstop (NASDAQ:WING) shares, reducing the price target to $300 from the previous $375, while maintaining a Neutral rating on the stock. The revision follows Wingstop's third-quarter 2024 earnings call earlier in the week, which revealed a solid domestic same-store sales (SSS) increase of 20.9%. This figure was in line with consensus expectations but fell short of what some investors anticipated.
The company's performance led to a significant drop in stock value, approximately 21%, on the day of the earnings release. In the subsequent two days, the stock did not show a notable recovery.
Piper Sandler's analyst noted that while there is no doubt about Wingstop's quality or its business momentum, the current market reaction is tied to practical considerations. Specifically, adjustments are being made to fourth-quarter 2024 and full-year 2025 earnings estimates by both buy-side and sell-side analysts.
Despite the impressive same-store sales growth reported for the third quarter, Wingstop has decided to maintain its full-year 2024 same-store sales guidance at around 20%, rather than increasing it. This decision appears to have had an impact on investor sentiment and the stock's subsequent performance.
The analyst emphasized that context is important in understanding the stock's movement. The lack of an increase in guidance, coupled with the adjustments to future earnings estimates and the high valuation multiple, has led to the sell-off in Wingstop shares.
The report from Piper Sandler suggests a cautious approach to Wingstop's stock, reflecting the recent market response to the company's financial outlook and performance.
In other recent news, Wingstop Inc . reported significant growth in Q3 earnings and revenues. The company announced earnings per share (EPS) of $0.88, a 35.4% increase, and a substantial 38.8% rise in total revenue to $162.5 million.
Wingstop's domestic same-store sales grew by 20.9%, and the company expects approximately 20% growth for the year 2024. The company also plans to open between 320 and 330 new units, exceeding previous forecasts.
Citi has maintained a Neutral rating on Wingstop but reduced the price target for the company's shares from $440.00 to $315.00, reflecting concerns over short-term challenges. BMO Capital Markets has also adjusted its price target for Wingstop to $335, while maintaining a Market Perform rating on the stock.
Stephens has adjusted its price target to $468 but kept its Overweight rating, and BTIG has upgraded Wingstop's stock from Neutral to Buy, setting a new price target of $370.
These recent developments follow Wingstop's announcement of its ambitious expansion plans and strategic partnerships aimed at increasing brand recognition. The company's digital sales, now accounting for 69% of total sales, were driven by its technology platform, MyWingstop.
The company's average unit volume exceeded $2.1 million, with a long-term goal of $3 million, and over 100 new restaurants were opened in the third quarter.
InvestingPro Insights
Recent data from InvestingPro sheds additional light on Wingstop's financial position and market performance. Despite the recent stock price decline, Wingstop has demonstrated strong revenue growth, with a 34.98% increase over the last twelve months as of Q3 2024. This aligns with the company's reported solid domestic same-store sales growth of 20.9% in the third quarter.
However, the stock's recent performance has been challenging, with InvestingPro data showing a 19.43% decline in the past week and a 28.45% drop over the last month. This reflects the market's reaction to the earnings call and maintained guidance, as discussed in the article.
InvestingPro Tips highlight that Wingstop is trading at a high earnings multiple, with a P/E ratio of 86.82. This high valuation may explain why investors reacted strongly to the company's decision not to raise its full-year guidance despite strong quarterly results.
On a positive note, analysts anticipate sales growth in the current year, which could potentially support the stock's recovery. Additionally, Wingstop has maintained dividend payments for 9 consecutive years, indicating a commitment to shareholder returns.
For investors seeking a more comprehensive analysis, InvestingPro offers 13 additional tips for Wingstop, providing a deeper understanding of the company's financial health and market position.
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