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Wedbush On Wingstop: Expect 'Solid Q2 Trends, Further Catalysts Ahead'

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Wedbush On Wingstop: Expect 'Solid Q2 Trends, Further Catalysts Ahead'

Several catalysts surrounding Wingstop Inc (NASDAQ: WING) have analysts at Wedbush increasingly bullish on the company’s future prospects.

Wedbush analyst Nick Setyan believes same-store sales growth outperformance and recurring special dividends should generate an increasing appreciate for the company's unique business model and unique value proposition, particularly when compared to its peers. Recent channel checks on 10 percent of domestic locations are indicating same-store sales growth ahead of the 1.9-percent consensus estimate.

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“We also believe drivers remain in place for sustained SSS growth momentum through 2017, including national TV advertising featuring a potentially more impactful ‘flavor’ focus, a continuing shift to digital, and the natural maturation cycle of new units," Setyan said. "We also believe delivery is a potentially meaningful untapped opportunity should the ongoing third-party test in the Las Vegas market prove successful."

Wingstop's next special dividend could reach as much as $4 per share and could be paid no later than the first half of 2018. Wedbush maintains an Outperform rating on Wingstop with a $36 price target.

While wing inflation may pose a near-term risk to the company's margins, the company could combat the rising costs through incremental franchise price increases.

“We see relatively low risk to transaction trends from an incremental price increase given pricing that has trended well below peers in recent years. We estimate every incremental 1% increase in franchisee pricing equates to ~$0.02 in annualized EPS, and that EBITDA lost from every 10% increase in wing costs at co-owned locations could be offset by ~1.5% franchisee pricing,” concluded Setyan.

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Latest Ratings for WING

DateFirmActionFromTo
Nov 2020BMO CapitalMaintainsOutperform
Nov 2020Cowen & Co.MaintainsOutperform
Oct 2020WedbushMaintainsOutperform

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