Wingstop (NASDAQ:WING), the US restaurant chain selling chicken wings, has been initiated at Outperform at Bernstein, with a price target of $340.
“High growth compounders in US restaurants are far and few between, and those with a multi-decade growth runway are rare. WING is one of those rare companies,” analysts at Bernstein said in a Tuesday note.
WING rose 1.3% ahead of the market open on Wednesday.
Bernstein sees WING as a “category of one” concept within the rapidly expanding Chicken Limited Service Restaurant (LSR) segment, with the potential to become "the next Domino's."
“We expect WING to deliver above consensus unit growth (12% vs cons. 11%), comp growth (6% vs cons. 4%) and EPS growth (20% vs cons. 17%) in medium term (FY23-28E), with an extended runway for sustained FCF growth (16%) over the coming two decades,” analysts wrote.
Although the company’s valuation may appear high at first glance, analysts anticipate further growth for Wingstop as it evolves from a promising "emerging" concept into a "proven success." This transformation is expected to sustain both high growth and valuation over time.
Comparing the free cash flow (FCF) growth of Wingstop with that of its peers during their respective 'maturation phases' indicates that Wingstop's FCF growth could exceed expectations if it follows a similar trajectory to its counterparts.