Wingstop: Revenue Spikes 27% in Q4, but Why is Stock Dropping?

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Wingstop: Revenue Spikes 27% in Q4, but Why is Stock Dropping?

• Wingstop stock was plummeted Wednesday, down 15%
• The chicken wing chain missed Q4 revenue estimates.
• Is this a buying opportunity?

Is it time to buy?

Wingstop (NASDAQ:) stock was getting crushed on Wednesday, dropping some 15% to $260 per share after the chicken wing chain reported fourth quarter earnings.

The Q4 numbers looked impressive when compared to the same quarter a year ago. Revenue spiked 27% year over year to $162 million, but that was below estimates of $165 million.

Net income surged 42% to $27 million, or 92 cents per share, which exceeded analysts’ estimates of 89 cents per share.

System-wide sales were up 28% to $1.2 billion. That includes all sales, from both franchises and the stores that Wingstop owns. Same-store sales, which are sales from locations that have been open at least a year, rose 10%. Meanwhile, the average unit volume (AUV), which is the average sales of all restaurants that have been open at least a year, rose 17% to $2.1 million.

In addition, the company opened 105 new restaurants in the quarter. For the full fiscal year, Wingstop had 358 net new openings, bringing the total to 2,563 worldwide locations, up 16% from the previous year.

Of that total, 2,204 restaurants are in the United States with 2,154 of them franchised and 50 were company-owned.

Is This a Buying Opportunity?

The extent of the drop in stock price may seem a bit overblown, given that it wasn’t a huge revenue miss and earnings beat expectations.

There may have also been some disappointment with projections of low- to mid-single-digit domestic same-store sales growth. That would be considerably lower than the 19.9% jump in fiscal 2024.

Further, selling, general, and administrative costs are expected to reach $140 million, up about 20% and on pace with the previous year.

So, while there are some concerns, the ******* issue is Wingstop’s high valuation. It has been an excellent and consistent stock over the years, averaging a 25% return over the past 10 years and 20% over the past five years.

That has led to a high valuation, with a P/E ratio of about 89. The P/E has come down over the past year as the stock has dropped about 18% over the past 12 months, but it is still high. In today’s selloff, investors probably saw the revenue projections as too low to justify the high price.

This dip was probably overdue, but I still don’t think the stock is in the buy range. Wingstop is a good company and it’s a stock to put on your radar, but just wait for things to settle a bit more.

That said, analysts’ love it, as it has a median price target of $364 per share and is considered a buy across the board. So, as always, do your own research.

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#Wingstop #Revenue #Spikes #Stock #Dropping

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