Market Overview

Analyst Tries To Debunk Bear Thesis Against Wingstop's Growth

Share:
Analyst Tries To Debunk Bear Thesis Against Wingstop's Growth

Some Wingstop Inc (NASDAQ: WING) investors argue the chicken wing chain's expansion will result in cannibalization, but a deep dive into the thesis points otherwise, according to BMO Capital Markets.

The Analyst

BMO's Andrew Strelzik maintains an Outperform rating on Wingstop with a price target lifted from $84 to $108.

The Thesis

Wingstop's 1,100 domestic units has a path to expand and achieve management's domestic unit goal of 3,000 units, Strelzik wrote in a note. Part of the expansion strategy includes 2,000 new units in the top 25 markets, which has some concerned over cannibalization.

As it stands today, 40% of Wingstop locations in the top 25 markets have another location within three miles, Strelzik said. This figure is shy of Domino's Pizza, Inc. (NYSE: DPZ) where the three-mile overlap stands at 54% in the same markets. In fact, 47% of Wingstop units in the top five markets (one-third of all U.S. locations) have a second location within a three-mile radius versus 55% at the pizza chain.

The "sizeable" gap suggests Wingstop has a notable unit growth opportunity before cannibalization concerns may become more valid. As such, Wingstop's growth strategy doesn't have any negative impact on related to same-store sales momentum and cannibalization.

Price Action

Wingstop's stock closed Monday at $91.93 per share. The stock hit a new 52-week high of $93.54 earlier this month.

Related Links:

Wingstop CEO Says Chain Has Zero 'True Competitor'

Stifel To Wingstop Investors: 'Get Ready To Wing It'

Latest Ratings for WING

DateFirmActionFromTo
Aug 2019MaintainsBuy
Aug 2019MaintainsEqual-Weight
Jul 2019Initiates Coverage OnSell

View More Analyst Ratings for WING
View the Latest Analyst Ratings

Posted-In: Andrew Strelzik BMO Capital Markets Chicken WingsAnalyst Color Price Target Restaurants Analyst Ratings General Best of Benzinga

 

Related Articles (DPZ + WING)

View Comments and Join the Discussion!

Latest Ratings

StockFirmActionPT
IQDowngrades
IQDowngrades21.0
COTYMaintains9.0
FNMaintains60.0
NNNMaintains57.0
View the Latest Analytics Ratings
Don't Miss Any Updates!
News Directly in Your Inbox
Subscribe to:
Benzinga Trading Daily
Get pre-market outlook, mid-day update and after-market roundup emails in your inbox.
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Daily Analyst Rating
A summary of each day’s top rating changes from sell-side analysts on the street.
Thank You

Thank you for subscribing! If you have any questions feel free to call us at 1-877-440-ZING or email us at vipaccounts@benzinga.com

PizzaRev Partners With Beyond Meat For New Topping Option

BMO: Chemours' Second Half 'More Difficult Than Anticipated'