On Thursday, Stephens, a financial services firm, adjusted its price target for Wingstop (NASDAQ:WING), a leading restaurant brand, to $468 from the previous $490. Despite the reduction, the firm maintained its Overweight rating on the stock.
This change follows Wingstop's third-quarter 2024 earnings report, which revealed a slight shortfall in same-store sales growth. The company achieved a 20.9% increase, slightly below the consensus estimate of 21.6%.
Wingstop's share price experienced a significant drop, closing the day down 21%. The market's reaction is attributed to investor expectations for a more robust fourth-quarter comparable sales (comp) forecast, which did not materialize as the company confirmed its full-year 2024 comp guidance of around 20%. This guidance fell short of what some investors had anticipated.
Despite the lower same-store sales figure, Wingstop demonstrated strong growth in its number of outlets, opening 106 net new restaurants. This represents a year-over-year growth of 17.1%, surpassing Wall Street's estimate of 67 new locations. Specifically, Wingstop inaugurated 79 new domestic units, which exceeded both the company's tracker and street estimates of 80 and 52, respectively.
Stephens remains optimistic about Wingstop's growth potential, citing the company's ability to sustain high single-digit to double-digit traffic growth. Additionally, the firm anticipates Wingstop to continue its trajectory of double-digit unit expansion. The revised price target of $468 is grounded in a detailed 11-year discounted cash flow (DCF) analysis.
The analyst from Stephens expressed confidence in Wingstop's prospects, advocating for investment in the company at the current share price levels. They believe that Wingstop is well-positioned to maintain its growth momentum and stands out among its peers in the restaurant industry.
In other recent news, BTIG upgraded Wingstop's stock from Neutral to Buy, setting a new price target of $370. The firm cited Wingstop's acceleration in unit development and best-in-class unit economics as the primary reasons for the upgrade. BTIG's analysts also suggested the potential for management to increase the royalty rate on new units in the future, which could enhance earnings potential.
Wingstop'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, contributing to a unit growth rate of 17%. The company's adjusted EBITDA rose 39.5% to $53.7 million, and earnings per diluted share increased by 35.4% to $0.88.
These recent developments indicate a company with ambitious expansion plans and strategic partnerships aimed at increasing brand recognition.
InvestingPro Insights
Despite the recent price target adjustment and market reaction, Wingstop (NASDAQ:WING) continues to show strong financial performance and growth potential. According to InvestingPro data, the company's revenue growth remains robust, with a 31.98% increase over the last twelve months as of Q2 2024, and an even more impressive 45.28% quarterly growth in Q2 2024. This aligns with the article's mention of Wingstop's strong growth in outlet numbers and Stephens' optimism about the company's growth potential.
InvestingPro Tips highlight that analysts anticipate sales growth in the current year, supporting the positive outlook mentioned in the article. Additionally, 8 analysts have revised their earnings upwards for the upcoming period, suggesting continued confidence in Wingstop's performance despite the recent stock price drop.
The company's profitability is also noteworthy, with an operating income margin of 26.71% over the last twelve months. This strong profitability supports Stephens' view on Wingstop's ability to sustain high growth rates.
It's worth noting that InvestingPro offers 19 additional tips for Wingstop, providing investors with a comprehensive analysis of the company's financial health and market position.
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