What Happened?
Shares of fast-food chain Wingstop (NASDAQ: WING) jumped 23.9% in the morning session after the company reported better-than-expected second-quarter earnings and raised its full-year guidance for global store expansion.
The restaurant chain announced adjusted earnings of $1.00 per share for the second quarter, which comfortably beat Wall Street's consensus estimate of $0.88. While total revenue of $174.3 million slightly missed some forecasts, it still represented a 12% increase from the previous year. Investors appeared particularly encouraged by the company's accelerated growth plans, as Wingstop raised its full-year global unit growth forecast to a range of 17% to 18%. This confidence was supported by a record 129 net new restaurant openings during the quarter. Furthermore, the company signaled its strong financial position by increasing its quarterly dividend by 11%. Despite a reported 1.9% decrease in domestic same-store sales, the strong profit beat and bullish expansion outlook drove positive sentiment.
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What Is The Market Telling Us
Wingstop’s shares are quite volatile and have had 17 moves greater than 5% over the last year. But moves this big are rare even for Wingstop and indicate this news significantly impacted the market’s perception of the business.
The previous big move we wrote about was 16 days ago when the stock dropped 3.6% on the news that an analyst at Melius initiated coverage on the stock with a "hold" rating and a $350 price target. While the price target suggests a slight upside from the previous close, the neutral "hold" rating seems to have tempered investor enthusiasm after a period of strong performance for the chicken wing chain. Melius noted that while Wingstop remains one of the restaurant industry's most consistent performers, the current stock price fairly reflects its growth prospects. The firm acknowledged Wingstop's "best-in-class unit economics, a streamlined menu, and a highly efficient supply chain" but concluded that the risk-to-reward profile appears balanced for now. This initiation comes amid a flurry of analyst activity, with Morgan Stanley recently raising its price target to $367 and maintaining an "overweight" rating, citing confidence in the company's market position.
Wingstop is up 23.9% since the beginning of the year, but at $361.93 per share, it is still trading 15.4% below its 52-week high of $427.92 from September 2024. Investors who bought $1,000 worth of Wingstop’s shares 5 years ago would now be looking at an investment worth $2,280.
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