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Investing.com - Jefferies lowered its price target on Noodles & Co. (NASDAQ:NDLS) to $2.00 from $2.50 on Thursday, while maintaining a Buy rating on the stock.
The price target reduction follows a challenging second quarter for the fast-casual restaurant chain, which reported same-store sales of 1.5%, restaurant-level margin of 12.8%, and EBITDA of $6.0 million, all below expectations. InvestingPro data reveals concerning fundamentals, with a weak gross profit margin of 13.6% and a concerning current ratio of 0.31, indicating potential liquidity challenges.
Jefferies noted that the company’s performance was negatively impacted by the Easter holiday shift and one-time costs related to a new menu launch, amid what it described as a competitive environment.
Despite the disappointing results, Jefferies highlighted some positive developments, including management’s increased focus on value offerings such as "Delicious Duos" and an acceleration to 5% same-store sales in the last two weeks of the quarter.
The firm also viewed Noodles & Co.’s decision to close more underperforming stores in 2025-2026 as prudent, acknowledging that while the company’s turnaround will take time, the risk/reward profile remains positively skewed.
In other recent news, Noodles & Company reported second-quarter earnings that did not meet analyst expectations and provided disappointing guidance for the full year. The company posted an adjusted loss of -$0.12 per share, which was worse than the anticipated loss of -$0.04 per share by analysts. Revenue for the quarter decreased by 0.7% to $126.4 million, missing the consensus estimate of $128.03 million. Despite a 1.5% year-over-year increase in system-wide comparable restaurant sales, the restaurant contribution margin fell to 12.8% from 15.5% in the same period last year. These results come amid ongoing challenges with consumer spending, which the company has noted in its guidance.
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