Citi raises First Watch stock price target to $25, maintains buy

On Thursday, Citi analysts increased the price target on First Watch shares (NASDAQ:FWRG) to $25.00, up from the previous $24.00, while continuing to endorse the stock with a Buy rating. The restaurant chain, currently valued at $1.2 billion, has seen its stock deliver a strong 21% return over the past six months. According to InvestingPro data, analyst targets for the stock range from $18 to $28, suggesting potential upside from current levels. The brand’s initiatives to enhance brand recognition are gaining momentum, as indicated by rising visitor numbers and new customer metrics throughout the first quarter. According to the analysts, First Watch is well-equipped to navigate the prevailing economic uncertainties, thanks to its customer base that tends to have higher incomes, minimal impact from tariffs, and new drivers of demand, particularly through increased marketing efforts. The company’s revenue growth of nearly 14% in the last twelve months and gross profit margin of 22% support this positive momentum. InvestingPro analysis reveals several additional key metrics and insights available to subscribers, including detailed profitability trends and growth forecasts.

The analysts at Citi believe that the company’s strategic focus on marketing will unlock sales and traffic growth over multiple years. This sustained effort is expected to result in a higher valuation multiple for First Watch shares. The commentary from Citi reflects confidence in the company’s direction and potential for continued growth despite the current macroeconomic challenges.

First Watch’s positioning in the market is bolstered by its customer base, which is less susceptible to economic fluctuations due to their higher income levels. This demographic advantage is complemented by the company’s limited exposure to tariffs, which can often be a concern for businesses in fluctuating economic climates.

The analysts underscored the importance of First Watch’s marketing investments, which they see as a significant factor in driving incremental demand. The company’s commitment to marketing is anticipated to contribute to a consistent increase in both foot traffic to its establishments and the acquisition of new customers.

In conclusion, Citi’s revised price target and sustained Buy rating for First Watch reflect an optimistic outlook for the company’s stock. The analysts cite the brand’s strategic marketing initiatives and robust customer base as key elements that are expected to support First Watch’s performance and lead to a higher stock valuation over time. While the company maintains a "GOOD" overall financial health score according to InvestingPro, subscribers can access the comprehensive Pro Research Report, which provides deep-dive analysis of First Watch’s valuation, financial health, and growth prospects among the 1,400+ US equities covered by the platform.

In other recent news, First Watch Restaurant Group (LON:RTN), Inc. has acquired three franchise-owned restaurants in Missouri, bringing the Lee’s Summit, West Columbia, and South Columbia locations under its direct control. This acquisition aligns with First Watch’s strategy for growth and value creation, adding to the 48 franchised restaurants integrated since May 2023. Additionally, TD Cowen has upgraded First Watch’s stock rating from Hold to Buy, with a new price target of $22, citing expectations of stronger same-store sales in 2025 due to improved marketing and reduced egg prices. Benchmark analyst Todd M. Brooks also raised the price target to $26, maintaining a Buy rating, following First Watch’s fourth-quarter earnings report that showed revenues of $263 million and an adjusted EBITDA of $24.3 million, exceeding expectations.

BofA Securities has further expressed confidence by lifting the price target to $28 while maintaining a Buy rating, noting improvements in customer traffic patterns. Despite a slight decline in same-store sales, the restaurant-level operating margin surpassed estimates, highlighting efficiency gains. In another development, First Watch has adopted a new executive severance plan, offering structured benefits in cases of termination without cause or resignation for good reason. This plan includes lump sum payments and COBRA premium coverage, aligning with industry standards to provide clarity and security for its leadership team. These developments reflect First Watch’s strategic initiatives and the positive outlook from analysts regarding its future performance.

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