On Wednesday, GEN Restaurant Group (NASDAQ:GENK) saw its price target increased by an analyst from Craig-Hallum, who cited the company's strong first-quarter results and potential revenue growth from its new Premium Menu. The price target was raised to $13.50 from $10.00, while the Buy rating was reaffirmed.
The company reported first-quarter results that surpassed expectations in both total sales and adjusted EBITDA, fueled by same-store sales (SSS) that significantly outperformed consensus estimates. The improvement in trends was particularly noticeable in March. GEN Restaurant Group has introduced a new Premium Menu, offering 10 gourmet proteins for an additional $20 per guest.
Although the Premium Menu did not significantly impact first-quarter results, management anticipates that this new offering will boost the average customer check, as evidenced by an increase in revenues during April.
GEN Restaurant Group has maintained a strong pace of expansion, opening three new units year-to-date. Management reiterated its guidance for new unit growth, and fiscal year 2025 is expected to be another robust year for expansion. The company is currently negotiating deals for at least 10 new locations. There is potential for even more aggressive growth in fiscal year 2026, with the possibility of expanding by more than 25% and adding over 20 locations.
Despite less than stellar same-store sales performance, the new restaurants are achieving high average unit volumes (AUVs) and restaurant-level margins that surpass the company's average.
InvestingPro Insights
The recent analyst upgrade for GEN Restaurant Group (NASDAQ:GENK) aligns with the company's positive performance trends. According to InvestingPro data, GENK has experienced a significant return over the last week, month, and three months, with a 14.33% increase in the past week and a 49.66% uptick over the last six months. This momentum could be indicative of investor confidence in the company's growth strategy and new Premium Menu initiative.
InvestingPro Tips suggest that GENK is trading at a high earnings multiple with a P/E ratio (adjusted for the last twelve months as of Q4 2023) of 189.9, which may reflect high growth expectations from the market. The company's revenue growth has also been positive, with a 10.55% increase over the last twelve months as of Q4 2023. Despite this, GENK does not pay dividends to shareholders and operates with a moderate level of debt, which are important factors for investors to consider.
For those interested in a deeper analysis, there are additional InvestingPro Tips available at https://www.investing.com/pro/GENK. Readers can use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, unlocking further insights that could guide investment decisions.
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