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Chicken wing restaurant chain Wingstop Inc (NASDAQ:WING) boats multiple catalysts that are "underappreciated" by investors and not factored into the stock's valuation, according to Wedbush.
The Analyst
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Wedbush's Nick Setyan upgraded Wingstop from Neutral to Outperform with a price target lifted from $51 to $59.
The Thesis
The case for aggressiveness on Wingstop's stock is fourfold, Setyan said in the upgrade note. (See the analyst's track record here.)
- Recent firsthand checks suggests the Street is understating the company's same-store sales growth potential through 2019. In fact, Wingstop should at the very least sustain a mid-single digit same-store sales growth through 2019 versus consensus estimates of 3.2 percent in the third quarter, 2.6 percent in the fourth quarter and 3.5 percent for full year 2019.
- Favorable wing costs coupled with more favorable SG&A implies the potential for Wingstop to beat unit-level margin estimates of 27.7 percent, the analyst said.
- The company could take advantage of more favorable wing prices in generating higher margins in new stores.
- Wingstop's existing U.S. franchise base is likely to continue developing new units even if initial returns on investments decline to a "still-sufficient" metric of 25 percent, Setyan said. The company's international opportunity ahead is favorable and unit growth could mimic the growth profile of pizza and other chicken chains, the analyst said.
Price Action
Wingstop shares were trading higher by 2.27 percent at the time of publication Thursday.
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Crypto Whales Are Loading Up — Are You?
New research shows the biggest crypto buyers are back. And this time? They could hold for the possibility that Bitcoin will surpass $100,000 in 2024. You don’t want to miss the next massive crypto bull run like we saw in 2020 and 2021. To know exactly what’s going on and what to buy… Get Access To Benzinga’s Best Crypto Research and Investments For Only $1.