U.S. stocks lower as investors rotate out of tech ahead of Jackson Hole
On Thursday, Citi analysts, led by Jon Tower, adjusted their price target on Wingstop shares (NASDAQ:WING), bringing it down to $300 from the previous $334, while maintaining a Neutral rating on the stock. The stock, currently trading at $265.02, has declined over 15% in the past week and 29% over six months. The adjustment comes in the wake of discussions surrounding the company’s fourth-quarter comparable sales, which fell short of expectations. According to InvestingPro data, 11 analysts have recently revised their earnings estimates downward for the upcoming period. The analysts noted that there is still an ongoing debate regarding the implications for the company’s performance in 2025, with the current run-rate suggesting weaker growth than the market’s expectation of a 5.7% increase.
Wingstop’s management has expressed a positive outlook on the potential benefits of new back-of-house technology and procedural improvements. These enhancements are anticipated to lead to faster service, increased satisfaction among customers and employees, and more efficient training. However, the analysts pointed out that without specific details on the sales opportunity or timing, investors lack a solid basis to anticipate an upturn in comparable sales.
The report also highlighted concerns about the company’s increasing capital expenditure intensity. Approximately $65 million is projected for capital expenditures in 2025, which is about 40% of Citi’s estimated cash from operations for the company. This significant ramp-up in spending could continue to weigh on Wingstop’s shares until there is greater clarity on the company’s financial outlook. Despite these concerns, InvestingPro analysis shows the company maintains a "GREAT" overall financial health score, with liquid assets exceeding short-term obligations and operating with moderate debt levels. Subscribers can access 15+ additional ProTips and comprehensive financial metrics in the Pro Research Report.
Despite these challenges, the company has provided a unit growth guide that is potentially on the conservative side, with expectations for mid-teens growth, translating to a 14-15% increase. The company has demonstrated strong historical performance with 36% revenue growth in the last twelve months and a 25% revenue CAGR over the past five years. This forecast, however, may not be sufficient to alleviate investor concerns over the near-term uncertainties facing the company.
In other recent news, Wingstop Inc . reported its fourth-quarter 2024 earnings, exceeding earnings per share (EPS) expectations with a result of $0.92 compared to the forecast of $0.89. However, the company’s revenue for the quarter was $161.8 million, which fell short of the projected $165.13 million. Despite the revenue miss, Wingstop experienced a 36.8% increase in system-wide sales for the full year, reaching $4.8 billion. The company also saw a significant rise in adjusted EBITDA, which grew by 44.8% to $212 million for the year.
In terms of analyst activity, Stifel adjusted its outlook on Wingstop, reducing the stock price target from $400 to $375 while maintaining a Buy rating. This decision was influenced by a reassessment of the company’s fiscal year 2025 estimates. Stifel expressed confidence in Wingstop’s long-term prospects, suggesting that any continued decline in stock price might present an opportunity for investors.
Additionally, Wingstop opened a record number of new restaurants in 2024, with plans to continue its expansion into 2025. The company aims for a global unit growth rate of 14-15% and plans to enter 2-4 new international markets. Despite the immediate challenges, Wingstop’s leadership remains optimistic about its growth trajectory, focusing on digital transformation and menu innovation to drive future sales.
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