Morgan Stanley: The Good And Bad For Buffalo Wild Wings

Morgan Stanley boosted its rating on Buffalo Wild Wings BWLD from Underweight to Equal-weight and maintained its $148 price target.

With shares recently slumping from $167 to $142, Morgan Stanley thinks now is time for an Equal-weight rating because, “shares trade closer to their 10 year avg P/E multiple and the spread between our bull and bear cases is roughly similar.”

Other bullish factors include sustained same-store sales, the likelihood for further franchisees acquisitions and low analyst earnings expectations.

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Analyst John Glass further explained factors keeping Buffalo Wild Wings at Equal-weight. First, the restaurant is two-thirds penetrated in North America, limiting growth. Other factors include industry uncertainty and margin pressure.

“A sharp fall off in new store productivity would underscore our maturation argument and cause shares to be rerated downward again, making the upgrade premature. Conversely, sustained SSS momentum, or incremental franchise acquisitions beyond that which was recently announced would cause our current forecast to be too conservative,” wrote Glass.

The $148 price target is based on 24 times forward earnings. Shares of Buffalo Wild Wings were last trading 1.1 percent higher at $144.10.