Goldman Upgrades Wingstop To Buy, Sets $28 Target

Wingstop Inc WING shares have declined by a sharp 10 percent since March 4, as compared to the 3 percent appreciation in the S&P 500.

However, Goldman Sachs’ Karen Holthouse upgraded the rating on the company from Neutral to Buy, while raising the price target from $27 to $28.

Growth Opportunities

Holthouse explained that a “deep dive analysis” of consumer data points in the new and emerging markets have increased confidence in the potential for growth “outside the core.”

The analyst mentioned that the analysis revealed “no steady decline off an initial honeymoon, and the rate of local searches versus unit growth suggests limited cannibalization risk.”

In addition, the company’s long term comp drivers, including national ad spend and digital penetration, remain intact.

Digital Opportunity

According to the Goldman Sachs report, “A model closer to pizza makes WING uniquely positioned to drive consumers to a digital channel.”

Holthouse expects ongoing comp tailwind of one percent, with longer term opportunities emerging from one-to-one marketing.

The analyst also pointed out that unlike its peers, Wingstop had lower exposure to labor inflation, with labor adversely impacting franchise economics/development at 20.8 percent for the company, as compared to 28 percent for its peers.