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On Monday, Benchmark analyst Todd Brooks revised the price target for GEN Restaurant Group (LON:RTN) (NASDAQ:GENK) to $11.00, down from the previous $14.00, while continuing to recommend a Buy rating for the stock. The stock, currently trading at $6.75, appears overvalued according to InvestingPro analysis, despite falling 36.45% over the past six months. Brooks’s decision followed the company’s release of its fourth-quarter financial results for 2024 after the market closed on Sunday.
GEN Restaurant Group, known by its ticker GENK, reported quarterly revenues and same-store sales (SSS) that surpassed market expectations. The company announced a revenue of $54.7 million and an SSS figure of negative 4.8%, both of which exceeded the consensus projections of $50 million in revenue and negative 6.3% SSS. InvestingPro data reveals the company’s challenging profitability metrics, with a weak gross profit margin of 16.08% and significant debt concerns. Despite the stronger sales figures, GENK’s restaurant-level profitability did not meet expectations, coming in 20 basis points lower than anticipated.
The company’s adjusted earnings per share (EPS) was reported at negative $0.02, aligning with the consensus estimates. However, GENK’s adjusted EBITDA of $2.1 million fell short of the expected $2.6 million. In his commentary, Brooks noted the offsetting factors of the better-than-expected revenue and SSS against the softer-than-anticipated restaurant-level margins, which stood at 17% compared to the consensus of 17.2%.
Brooks emphasized the rationale behind the revised price target, attributing it to a more conservative margin outlook for GENK in the fiscal year 2025. Despite the lowered price target, the analyst’s stance on the stock remains positive, as reflected in the maintained Buy rating. The adjustment reflects a response to the latest operational results while taking into account the company’s financial performance and future expectations.
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