Look For A Better Entry Point To Bite Into Buffalo Wild Wings

Canaccord Genuity’s Lynne Collier believes the valuation of Buffalo Wild Wings BWLD mostly reflects the company’s “recently announced financial engineering and entrance of an activist.”

Collier initiated coverage of the company with a Hold rating and $175 price target.

Stock Performance

Given that the stock surged 19.6 percent over the past month, the analyst prefers not to “chase shares in light of macro headwinds and still limited top-line visibility.”

For the stock to move significantly higher, Collier believes investors would need evidence of same-store sales stability or improvement.

“Following the analyst day held on August 16, we came away incrementally positive on BWLD’s top-line initiatives and management’s ability to control costs,” the analyst mentioned.

Related Link: Buffalo Wild Wings Could See Margin Improvement As Wing Prices Track 5% Lower Than Last Year

Challenging Environment

However, Collier also noted that the environment remains challenging, especially for the bar and grill category.

Following several years of robust outperformance and market share gains, Buffalo Wild Wings’ same-store sales slowed down in recent times, turning negative in H1:16.

Negative Trends

According to the Canaccord Genuity report, “It is difficult to pinpoint what has contributed to the downturn but we outline the following: (1) multi-year tough comparisons; (2) weakness in bar & grill category; (3) potential competitive intrusion; (4) fairly aggressive menu pricing; and 5) lack of value messaging.”

Collier believes the negative trends would continue until Q4, when the same-store sales hurdle eases and the company’s new top line initiatives begin to bear fruit.

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