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Investing.com -- Wells Fargo initiated coverage on Shake Shack (NYSE:SHAK), Dutch Bros, and Wingstop (NASDAQ:WING), assigning Equal Weight to Shake Shack and Overweight to both Dutch Bros and Wingstop as it see potential upside despite near-term challenges.
Wells Fargo (NYSE:WFC) initiated Shake Shack at Equal Weight with a $95 price target, citing balanced risk and reward after a recent stock pullback.
The firm highlighted concerns about slowing comparable sales growth, increased discounting, and a tough industry backdrop in 2025.
“SHAK’s 2025 comp guidance of ~3% isn’t a layup,” Wells Fargo said, noting that achieving this target would require improvements in traffic and average check growth, which may be difficult given rising price resistance and category headwinds.
While Shake Shack continues to expand with mid-teens unit growth and margin improvement potential, questions remain about how many units certain markets can support.
The company’s drive-thru strategy is still being refined, and new store productivity may decline as it enters lower-income regions.
While Wells Fargo initiated Dutch Bros at Overweight with an $80 price target, on unit economics, disruptive growth strategy, and potential to double EBITDA in under three years.
The firm expects 2025 and 2026 same-store sales to grow 5%, driven by mobile ordering, loyalty programs, expanded food offerings, and brand awareness.
BROS is among the best consumer growth stories, Wells Fargo noted, forecasting 27% EBITDA growth in 2025 to $291 million.
Despite its premium 42x forward EV/EBITDA valuation, the firm believes Dutch Bros deserves the higher multiple due to accelerating growth and expanding margins.
Wells Fargo initiated Wingstop at Overweight with a $270 price target, citing an attractive entry point after a 28% stock decline post-Q4 earnings.
The firm sees potential for a sharp re-rating in the second half of 2025 as easier comparisons, improved ad spending, and stronger marketing efforts drive same-store sales growth.
We view WING among the best-in-class consumer growth stories, Wells Fargo stated, emphasizing its strong unit economics, differentiated menu, and low-cost franchise model.
Wingstop could expand to 10,000 units globally, with ample room for growth in the U.S. and internationally.
Wells Fargo expects Wingstop’s earnings to rebound in the second half of 2025, supported by easing year-over-year comparisons, lower wing prices, and potential for increased share buybacks.
While Wells Fargo sees near-term challenges for all three stocks, it expects Dutch Bros and Wingstop to outperform due to their strong growth drivers and resilient business models. Shake Shack faces a more balanced risk/reward setup with higher earnings uncertainty in 2025.