On Thursday, TD Cowen reaffirmed its confidence in Wingstop (NASDAQ:WING), raising the price target for the company's shares to $410 from the previous $355 while maintaining an Outperform rating. The adjustment reflects the firm's optimistic view on Wingstop's future performance, particularly in terms of same-store sales growth.
The company has reportedly sustained its valuation multiple thanks to a robust momentum in same-store sales. TD Cowen's analysts have revised their same-store sales forecast for 2024 upward to 9.0% from 7.0%.
This projection surpasses the Consensus Metrix average estimate of 7.3% and the company's own mid-single-digit (MSD%) guidance. The rationale behind this increased optimism stems from Wingstop's impressive 21.2% same-store sales growth in the fourth quarter of 2023, which came even after cycling through significant growth drivers implemented in mid-2022.
Wingstop's recent growth drivers included the introduction of a chicken sandwich, an increase in marketing expenditures to 5% of sales from 4%, and the launch of a partnership with Uber (NYSE:UBER) Eats.
Despite these initiatives having been launched in the previous year, sales continued to accelerate through the fourth quarter of 2023. The analyst attributes this sustained momentum to the growing brand recognition, which has been partly fueled by a successful new advertising campaign that kicked off in September with a new creative agency.
The company's advertising efforts are expected to receive an additional boost from an anticipated 22% growth in system sales in 2024. This increase is projected to significantly expand the marketing budget, further enhancing brand awareness and customer visit frequency.
The overall positive outlook on Wingstop's performance, including the expected same-store sales growth, has led to the maintenance of the Outperform rating despite the stock trading at its peak fiscal year two enterprise value to earnings before interest, taxes, depreciation, and amortization (EV/EBITDA) ratio. Consequently, Wingstop has been slightly adjusted in TD Cowen's rankings, moving from the #3 to the #4 pick.
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