U.S. stocks lower as investors rotate out of tech ahead of Jackson Hole
On Thursday, Bernstein SocGen Group adjusted its price target on Wingstop (NASDAQ:WING) shares, reducing it from $380 to $330 while maintaining an Outperform rating. The revision follows Wingstop’s latest earnings call, which suggested a lengthier timeline than anticipated for the company to realize its full potential. The stock, currently trading at $265.02, has experienced significant pressure, falling 15% in the past week and 29% over the last six months.According to InvestingPro data, Wingstop maintains a "GOOD" overall financial health score, with particularly strong profitability metrics. Subscribers can access 15+ additional exclusive ProTips and comprehensive analysis through the Pro Research Report.
Analysts cited several factors for the updated price target, including a challenging operating environment and a slower start to the year across the industry. Despite these headwinds, the firm highlighted Wingstop’s untapped market potential, noting a 20% awareness gap compared to national peers. The company’s increased advertising budget, which is up 40% from 2022, and the initial signs of growing customer frequency among digital users were seen as positive indicators. The company’s strong fundamentals are reflected in its impressive 36% revenue growth over the last twelve months, with analysts forecasting continued sales growth this year.
Moreover, the anticipation of Wingstop’s new AI-led kitchen platform contributed to the high expectations for same-store sales (SSS) growth to be in the mid to high single digits by 2025. However, the earnings call tempered these expectations, suggesting that it will take longer to achieve these growth targets.
Bernstein’s analysts expect limited near-term upside for Wingstop’s stock until SSS growth stabilizes, which they predict will happen in the second half of 2025 when year-over-year comparisons become more favorable. Despite the near-term volatility, Bernstein remains optimistic about the long-term outlook for Wingstop, advising patient investors to consider this period an opportunity to invest at a moderate valuation.
The price target of $330 is derived from a 20-year discounted cash flow (DCF) analysis, with a weighted average cost of capital (WACC) of approximately 9.2%, down from 9.5%, and a terminal growth rate of 2.5%. This financial modeling reflects the firm’s confidence in Wingstop’s enduring market potential despite the short-term challenges. With a market capitalization of $7.7 billion and strong operational metrics including a 48% gross profit margin, the company maintains solid fundamentals despite current market pressures.
In other recent news, Wingstop reported its fourth-quarter 2024 earnings, with earnings per share (EPS) of $0.92, surpassing the forecast of $0.89. However, the company faced a revenue shortfall, reporting $161.8 million against the expected $165.13 million. This revenue miss contributed to a negative market reaction despite strong system-wide sales growth of 36.8% for the year. Analysts from Goldman Sachs, BMO Capital, Citi, and Stifel have adjusted their price targets for Wingstop, citing mixed financial results and forward-looking guidance. Goldman Sachs reduced its price target to $330 while maintaining a Buy rating, acknowledging the company’s long-term growth potential despite challenges. BMO Capital and Citi both set their price targets at $300, highlighting concerns over comparable sales and increased capital expenditures. Stifel lowered its target to $375, maintaining a Buy rating and expressing confidence in Wingstop’s fundamental business health. The company’s plans for 2025 include a global unit growth target of 14-15% and continued focus on digital transformation and menu innovation.
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