On Thursday, Jefferies maintained a Hold rating on Wingstop (NASDAQ:WING) but increased the price target for the shares to $310 from $280. The adjustment comes after observing the company's same-store sales (SSS) strength at the end of the fourth quarter, which is also supported by recent Placer data.
The firm noted that Wingstop's platform initiatives are starting to show results and may lead to earnings surpassing the Street's estimates for 2024, which are already above the company's low to mid-single-digit percentage algorithm.
The analyst from Jefferies believes that the predictability of Wingstop's business model is improving, thanks to reduced margin volatility and the strength in the cost of capital. This is expected to support a higher relative growth rate compared to its peers over time.
However, the firm also pointed out that much of this growth potential is already factored into the stock's valuation, which trades at approximately 60 times EV/EBITDA.
The updated price target reflects the analyst's view that while there is potential for upside, the current valuation largely captures the expected performance. The Hold rating suggests that Jefferies advises investors to maintain their positions in Wingstop shares without advocating for additional buying or selling at this time.
Wingstop's focus on developing its platform and the resultant earnings potential are key factors in the revised price target. The company's efforts are expected to contribute to its growth trajectory, which is seen as more predictable and stable, despite the stock's high valuation relative to earnings. The new price target of $310 suggests a modest upside from the previous target, aligning with the cautious optimism expressed by Jefferies regarding Wingstop's prospects.
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