On Monday, Piper Sandler showed confidence in First Watch (NASDAQ: FWRG) by increasing the price target to $23.00 from $22.00, while reiterating an Overweight rating stock. The revision followed the company's third-quarter 2024 financial report and conference call.
During the past week, First Watch disclosed its 3Q24 results, which were largely in line with market expectations. The company's recent targeted marketing initiatives and a return to positive dining room traffic in September were among the positive highlights mentioned by the management.
Additionally, the management team pointed out that business trends in Florida have reached a stable level, suggesting that while still trailing behind overall company performance, the situation did not deteriorate further over the quarter.
First Watch's management has also adjusted its 2024 earnings before interest, taxes, depreciation, and amortization (EBITDA) guidance, raising the lower end of the forecast range. This adjustment is attributed to the effective management of restaurant-level margins (RLMs) amidst a challenging same-store sales (SSS) landscape.
Despite these positive developments, the analyst anticipates that traffic trends will likely continue to be negative in the fourth quarter of 2024. As such, the progression of these trends will be closely monitored into the first half of 2025, both for the industry at large and specifically for First Watch.
In other recent news, First Watch Restaurant Group (LON:RTN) has disclosed its third quarter 2024 financial results, indicating a combination of growth and challenges. The company reported system-wide sales of $291.8 million and total revenues of $251.6 million, a 14.8% increase from the previous year.
Despite a 4.4% dip in same-restaurant traffic, the addition of 44 new restaurants over the year has contributed to the revenue growth. The company's net income stood at $2.1 million, and adjusted EBITDA rose to $25.6 million.
First Watch plans to continue its expansion, with 23 new locations expected to open in the fourth quarter, aiming to reach a total of 2,200 locations in the future. The company anticipates same-restaurant sales growth to be around -1% and adjusted annual revenue growth between 16.5%-17%.
The company's adjusted EBITDA guidance has been increased to $110 million-$112 million, including $14 million from acquisitions. Despite the challenges, the company remains optimistic, leveraging marketing strategies to improve performance in 2025.
InvestingPro Insights
First Watch's recent performance has caught the attention of investors, as reflected in the company's strong market movements. InvestingPro data shows that FWRG has experienced a significant 22.43% return over the last week and an impressive 50.5% return over the last month. These figures align with the positive sentiment expressed in Piper Sandler's increased price target.
However, investors should be cautious. An InvestingPro Tip indicates that FWRG's RSI suggests the stock is in overbought territory, which could imply a potential correction in the near term. Additionally, with a P/E ratio of 63.63, the company is trading at a high earnings multiple, which may raise questions about its valuation sustainability.
On the financial front, First Watch has shown solid growth, with revenue increasing by 19.77% over the last twelve months to $997.25 million. The company's EBITDA growth of 26.19% during the same period is particularly noteworthy, supporting management's positive outlook on EBITDA guidance.
For investors seeking a more comprehensive analysis, InvestingPro offers 11 additional tips for FWRG, providing deeper insights into the company's financial health and market position.
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