Potbelly stock rating downgraded to Hold by Lake Street after RaceTrac deal

Investing.com - Lake Street Capital Markets downgraded Potbelly Corp (NASDAQ:PBPB) from Buy to Hold while raising its price target to $17.12 from $15.00 following the sandwich chain’s acquisition agreement with RaceTrac. The stock has shown remarkable performance, delivering a 122% return over the past year and currently trading near its 52-week high of $17.04.

The downgrade comes after Potbelly announced it has entered into an agreement to be purchased by RaceTrac for $17.12 per share. RaceTrac will commence a tender offer to acquire all shares and requires a majority of shares to complete the transaction. According to InvestingPro data, the company currently commands a market capitalization of $514 million, with its shares trading at notably high valuation multiples.

All of Potbelly’s directors and management have agreed to tender their shares, representing approximately 11% of outstanding shares. The deal is expected to close in the fourth quarter of 2025.

The $17.12 offer price represents a 47% premium to the 90-day trading volume weighted average price of Potbelly stock. Based on 2026 EBITDA estimates, the deal represents an approximate 12.6x EV/EBITDA multiple.

Lake Street previously valued Potbelly shares at an 11x multiple on 2026 EBITDA estimates to derive its prior $15 price target, and is maintaining its financial estimates for the company.

In other recent news, Potbelly Corporation reported its financial results for the second quarter of 2025, exceeding analyst expectations. The company achieved an earnings per share of $0.09, surpassing the forecast of $0.08. Additionally, Potbelly’s revenue reached $123.7 million, higher than the anticipated $122.37 million. In a significant development, RaceTrac, Inc. announced plans to acquire Potbelly in an all-cash transaction valued at approximately $566 million. The acquisition offer stands at $17.12 per share, representing a 47% premium over Potbelly’s 90-day volume-weighted average price as of September 9. This transaction is expected to close in the fourth quarter of 2025, pending regulatory approvals and customary closing conditions. These recent developments highlight key movements within Potbelly Corporation.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.