How Tasty Is Kona Grill Stock?

Kona Grill Inc KONA reported its second-quarter results after Monday's market close. The restaurant operator reported a loss of $0.01 on revenue of $36.2 million versus analyst expectations for a $0.01 per share profit on revenue of $35.93.

Shares traded recently at $21.27, up more than 4.7 percent.

Oppenheimer: The Future Is ‘Bright'

Brian Bittner of Oppenheimer commented that Kona's adjusted EBITDA of $3.9 million exceeded the Street's $3.7 million estimate, mostly due to better restaurant profits. Restaurant margins of 18.4 percent also exceeded the Street's 17.8 percent estimate, despite an 80 basis point decline from a year ago but marked an improvement from the first quarter's 160 basis point decline. Non-comp units expanded 230 basis points, displaying new-found efficiencies.

Kona's second-quarter same-store sales of 1 percent was in-line with the company's own guidance and the Street's consensus. In addition, the company's third-quarter same-store sales guidance of 2 percent is about in-line with the 2.3 percent analysts were expecting.

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Bittner concluded that Kona's second quarter "wasn't as bad as feared." Looking forward, management remains committed to being "disciplined" with real estate and "staying true" to its 20 percent annual growth targets.

Shares remain Outperform rated with an unchanged $25 price target.

Wedbush: Q3 Guidance Conservative

Nick Setyan of Wedbush commented in a note that Kona's third-quarter same-store sales growth of 2 percent and ($0.10) in earnings per share is conservative.

According to Setyan, quarter-to-date transactions have turned positive in July versus a 1.3 percent decline in the second quarter. With 2.5 percent of menu price increases benefiting the third quarter, a same-store sales growth of more than 2.5 percent of "realistic."

"The EPS delta versus the Street in Q3 is almost entirely due to higher pre-opening expenses, which we do not believe investors will penalize the company for," Setyan wrote. "We also believe that a higher comp could result in upside to EPS guidance."

Setyan also noted that 60 percent of Kona's store base will feature a new and modern design by the end of the year. The nature of these remodels will "serve as significant comp drivers" once completed.

Shares remain Outperform rated with an unchanged $30 price target.

Wunderlich: Patient Investors Will Be Rewarded

Finally, Robert Derrington of Wunderlich commented in a note that Kona's runway for growth "remains substantial" and patient investors will benefit from the company's rapid 20 percent plus development pace and improves its store-level cash flows and margins.

According to Derrington, Kona's stock was recently trading at a discount to its peers based on 2015 EV/revenue at 1.4x versus the peer median that is greater than 2.5x. As such, the analyst reiterated a Buy rating on shares with an unchanged $28 price target which assumes similar valuation metrics.