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Wednesday, April 23, 2025
On Wednesday, Noble Capital initiated coverage on The ONE Group Hospitality Inc. (NASDAQ: NASDAQ:STKS) with an Outperform rating and set a price target of $5.00 per share. According to InvestingPro data, analyst targets range from $3.50 to $5.50, with the stock currently trading at $2.88. The company appears undervalued based on InvestingPro’s Fair Value analysis. The ONE Group is recognized for its role in the "Vibe Dining" subsegment, which combines quality culinary experiences with an engaging social atmosphere, including elements like DJs and dancing. This dining category is expected to grow at above-average rates, supported by consumer demand for more than just food.
The company’s transformative acquisition of Benihana/RA Sushi in May 2024 has been highlighted as a significant event, more than doubling the company’s revenue and adjusted EBITDA. It also diversified The ONE Group’s customer base, locations, price points, and experiences. Analysts anticipate that Benihana will enhance the overall profitability of the company. InvestingPro data shows impressive revenue growth of 102.35% over the last twelve months, though the company operates with a significant debt burden following the acquisition.
The ONE Group has substantial growth potential, with management eyeing the possibility of expanding to over 600 locations worldwide, a sharp increase from the current 167. This expansion is believed to be achievable through a more targeted franchising strategy, especially after the Benihana acquisition.
Despite some positive operational trends in recent quarters, economic uncertainty has been acknowledged as a potential challenge to achieving strong same-store sales (SSS) growth. For the first quarter of 2025, the firm projects modest negative SSS but remains hopeful for improved results as the year progresses. Revenue of $202.5 million and adjusted EBITDA of $24.3 million are projected for 1Q25, with full-year 2025 projections of $844 million in revenue and $102.2 million in adjusted EBITDA. InvestingPro subscribers can access 10+ additional exclusive insights about STKS’s financial health and growth prospects through the comprehensive Pro Research Report.
In other recent news, One Group Hospitality reported its fourth-quarter 2024 earnings, missing the earnings per share (EPS) forecast significantly. The company posted an EPS of -$0.03, falling short of the expected $0.18, despite a notable revenue increase to $221.9 million, which surpassed forecasts. For the full year, One Group Hospitality saw its revenue double to $672 million, driven by strategic acquisitions and pricing strategies. The acquisition of Benihana and Rasushi in spring 2024 contributed significantly to these gains, although the company faced a decline in restaurant operating profit margins. Analysts have noted the company’s plans to expand the Benihana brand and introduce a customer loyalty program as part of its strategic initiatives. Looking ahead, One Group Hospitality projects 2025 revenue between $835 million and $870 million, with adjusted EBITDA expected to range from $95 million to $115 million. The company also plans to open 5-7 new venues and is exploring opportunities in non-traditional venues such as airports and hotels.
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