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On Friday, Craig-Hallum analyst Jeremy Hamblin increased the price target for Red Robin Gourmet Burgers (NASDAQ:RRGB) to $11.00, up from the previous target of $10.00, while reaffirming a Buy rating on the stock. According to InvestingPro data, the stock currently trades near its 52-week low of $2.51, having declined over 62% in the past year.
Red Robin Gourmet Burgers announced a significant executive change as David Pace assumed the role of President and CEO, succeeding G.J. Hart, who will continue in an advisory capacity until September. Pace, who has been a part of Red Robin’s board since 2019, brings over three decades of industry expertise to his new position. The leadership change comes at a crucial time, as InvestingPro analysis indicates the company faces significant challenges with a weak financial health score and substantial debt burden of $585 million.
The company also shared a positive first-quarter update, with same-store sales (SSS) slightly surpassing analyst expectations and adjusted EBITDA projected to top previous forecasts. The company’s last twelve months EBITDA stands at $37.25 million, though InvestingPro analysis reveals ongoing profitability challenges with a gross profit margin of 12.57%. These encouraging financial indicators come alongside the recent launch of Red Robin’s Bottomless Burger Pass, which experienced a rocky start due to high demand causing the website to crash, leading to customer dissatisfaction voiced on social media platforms.
Despite the technical difficulties, the promotion drew an impressive number of potential customers, with 12 million people attempting to access the website within minutes of the launch. This incident underscored the strong customer interest and loyalty that Red Robin enjoys.
Hamblin noted David Pace’s proven leadership skills, particularly highlighting his achievements in the casual dining sector and his successful tenure at Jamba Juice, which culminated in the sale of the company to a strategic buyer. The analyst expects that investors will respond positively to Pace’s appointment as CEO.
In light of these developments, Craig-Hallum has reiterated its Buy rating and adjusted the price target for Red Robin stock to reflect the company’s positive outlook and leadership changes. Based on InvestingPro Fair Value calculations, the stock currently appears to be trading near its fair value, with analysts setting targets ranging from $3.25 to $12.00 per share.
In other recent news, Red Robin Gourmet Burgers Inc. announced a leadership transition with G.J. Hart stepping down as President and CEO, transitioning to an advisory role, while David A. Pace takes over. This change comes alongside expectations of a first-quarter comparable restaurant sales increase of approximately 3% and Adjusted EBITDA surpassing the forecasted $18 million to $19 million. Red Robin also reported a significant miss in their fourth-quarter 2024 earnings, with an EPS of -0.94 compared to the expected -0.29, and revenue of $258.2 million falling short of the forecasted $285.62 million. Despite these challenges, the company saw a 3.4% increase in comparable restaurant revenue and an improvement in adjusted EBITDA to $12.7 million, suggesting better cost management. Looking ahead, Red Robin plans to close 10-15 underperforming restaurants in 2025 and has set a revenue guidance for the year between $1.225 billion and $1.250 billion. The company also anticipates a restaurant-level operating profit of 12-13% and an adjusted EBITDA of $60-$65 million. Additionally, Red Robin is focusing on enhancing marketing efforts and reinvesting in facilities under the new leadership of David A. Pace.
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