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On Tuesday, TD Cowen analysts adjusted their stance on First Watch (NASDAQ:FWRG), upgrading the stock rating from Hold to Buy and setting a new price target of $22, up from the previous $21. The move reflects a positive outlook for the restaurant chain’s future performance. The company, currently valued at $1.01 billion, has demonstrated strong revenue growth of ~14% over the last twelve months, though InvestingPro data indicates the stock is trading above its Fair Value.
The upgrade is based on the anticipation of a stronger year in 2025 for same-store sales (SSS), driven by more effective and higher levels of marketing. Analysts at TD Cowen noted that the headwinds faced in 2024 are showing signs of abating, providing a more favorable risk/reward scenario for investors. However, InvestingPro reveals that 8 analysts have recently revised their earnings expectations downward for the upcoming period. Discover more insights with InvestingPro’s comprehensive research report, covering what really matters for FWRG and 1,400+ other stocks.
A key factor contributing to the optimistic projection is the recent decline in egg prices from their early March peaks. This decrease is seen as a catalyst for an adjusted EBITDA upside for First Watch. The analysts believe that the lower costs will help improve the company’s profitability.
Looking further ahead, TD Cowen expects First Watch to experience consistent mid-term percentage adjusted EBITDA growth. This sustained growth is anticipated to be a boon for the company’s stock, offering potential for multiple expansion.
In summary, the upgrade by TD Cowen underscores a belief in First Watch’s potential for financial improvement and stock performance enhancement in the coming years. The analysts’ comments suggest that the company’s strategic marketing efforts and easing cost pressures will contribute to its success.
In other recent news, First Watch Restaurant Group (LON:RTN), Inc. reported its fourth-quarter 2024 earnings, surpassing expectations with an earnings per share (EPS) of $0.01 against a forecast of $0.0033. The company’s revenue reached $263.3 million, marking a 16.8% year-over-year increase, excluding a 53rd week in the prior period. Adjusted EBITDA rose to $24.3 million, exceeding the anticipated $23.4 million, driven by labor efficiency and reduced expenses. Benchmark analyst Todd M. Brooks raised the price target for First Watch to $26, maintaining a Buy rating, citing improving customer traffic trends. Similarly, BofA Securities increased the price target to $28, also maintaining a Buy rating, while Jefferies adjusted its target to $24 but kept the Buy rating, highlighting the company’s strategic growth plans and marketing investments. Additionally, First Watch has implemented a new executive severance plan, providing benefits in cases of termination without cause or resignation for good reason. These developments underscore First Watch’s strategic initiatives and financial performance, which have garnered positive attention from analysts.
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