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2 Different Takes On B-Dubs Ahead Of Earnings

2 Different Takes On B-Dubs Ahead Of Earnings

Shares of Buffalo Wild Wings (NASDAQ: BWLD) continue trading near multi-year lows, but could stage a rebound ahead of the company's second-quarter earnings report scheduled for July 26.

UBS Sees Upside To $175

Investors remain focused on a few key factors that would support B-Dubs' growth, including an inflection in same-store sales and margins and restaurant development, UBS' Dennis Geiger said in a report. The company could succeed in delivering on these improved metrics going forward, which prompted the analyst to maintain a Buy rating on the stock with an unchanged $175 price target.

First, competitive overlap in the restaurant sector remains relatively low for B-Dubs with an average location competing against roughly six other casual diners, which is better than the peer group average of eight, the analyst explained. Cannibalization and own-store overlap also appears to be "manageable" as there is a 15 minute separation between each B-Dubs location which is in line with peers.

Second, there are just 1,250 total units that represents 70 percent of the company's target of 1,700 North American stores, which implies a path ahead towards unit growth. Meanwhile, the company is experimenting with "B-Dub Express" concepts that could total 200 or more locations.

Finally, a focus on value, improvements in lunch offerings, takeout initiatives, digital and loyalty efforts and delivery options should support a same-store sales improvement in 2017. Over the longer term, the company could succeed in reporting a system same-store sales of low- to-mid single digit.

See Also: Of Bulls, Bears And Buffalo Wild Wings

Bottom line, an improvement in same-store sales remains a "show-me story" but the stock's current valuation appears to be compelling given a solid long-term growth story with optionality, Geiger concluded.

Cannacord: Not So Fast

Analysts at Cannacord Genuity turned incrementally bearish on Buffalo Wild Wings as it faces many near-term challenges. Lynne Collier maintains a Hold rating with a price target slashed from $160 to $135.

Some of the immediate challenges the company will have to navigate include "stubbornly high" chicken wing prices, ongoing promotional activity spending and a poor industry wide trend among all casual dining chains concerning June traffic.

Over the near term, B-Dubs will have to face the prospect of continued high chicken wing prices and a change to its promotional strategy away from half-price Tuesdays towards a buy-one-get-one-free promotion, Collier continued. Meanwhile, the company is likely testing a reduction in the number of wings that it serves per order.

All of these concerns combined will likely keep shares range bound and investors should consider remaining on the sidelines.

Latest Ratings for BWLD

Nov 2017DowngradesBuyHold
Nov 2017DowngradesBuyNeutral
Nov 2017DowngradesBuyHold

View More Analyst Ratings for BWLD
View the Latest Analyst Ratings

Posted-In: Chicken Prices Chicken Wings Dennis GeigerAnalyst Color Price Target Restaurants Analyst Ratings General Best of Benzinga


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