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On Tuesday, Jefferies analyst Andy Barish adjusted the price target for First Watch (NASDAQ:FWRG) shares, reducing it to $24 from the previous $26, while continuing to endorse the stock with a Buy rating. Currently trading at $16.83, the company maintains a market capitalization of $1.1 billion and trades at a P/E ratio of 59.5x. According to InvestingPro analysis, the stock appears fairly valued based on its comprehensive Fair Value model. Barish noted a modest outperformance in fourth-quarter EBITDA and margins, which was slightly above the preannounced same-store sales (SSS) and unit growth figures.
First Watch’s guidance for fiscal year 2025 anticipates a return to positive low single-digit percentage same-store sales and stable customer traffic, with an expected increase after the first quarter. Building on its impressive 19.8% revenue growth in the last twelve months, the company’s decision to elevate marketing expenditures this year, coupled with a refined strategy and enhanced technology, is believed to support this growth. Adjusted EBITDA for fiscal year 2025 is projected to be between $124 million and $130 million, representing an approximate 12% increase from the current $99.7 million. For deeper insights into First Watch’s financial health and growth prospects, including 6 additional ProTips, visit InvestingPro.
The analyst’s perspective suggests that the adjusted EBITDA guidance aligns with market expectations, considering the high single-digit percentage increase in commodity costs, specifically eggs. With analyst targets ranging from $18 to $28, and operating with a significant debt burden of $778.9 million, the company faces both opportunities and challenges. Despite a slight reduction in the EBITDA estimate for fiscal year 2025, Barish maintains a $150 million estimate for fiscal year 2026. The long-term growth algorithm for First Watch is deemed undervalued, reinforcing the Buy rating on the stock.
In other recent news, First Watch Restaurant Group (LON:RTN) Inc. reported its fourth-quarter 2024 earnings, surpassing analysts’ expectations with an earnings per share (EPS) of $0.01, compared to the forecasted $0.0033. The company also reported a revenue of $263.3 million, slightly above the projected $263.01 million, representing a 16.8% increase from the previous year. First Watch opened 50 new restaurants in 2024, with 25 of those openings occurring in the fourth quarter. Additionally, the company’s adjusted EBITDA rose to $24.3 million, nearly $5 million more than the previous year. Despite these positive financial results, First Watch’s stock saw a decline in premarket trading. Looking ahead, the company plans to open 59-64 new system-wide restaurants in 2025 and anticipates a 20% total revenue growth. Analyst firms such as Barclays (LON:BARC) and TD have shown interest in the company’s strategic marketing investments aimed at boosting customer frequency and acquiring new guests. These developments highlight First Watch’s ongoing efforts to expand its presence and enhance its operational strategies.
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