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Investing.com — Wingstop Inc (NASDAQ:WING) is benefiting from lower prices for chicken and new menu offerings, and its stock valuation is showing it.
BMO Capital Markets cut its rating on the stock to Market Perform but raised its price target to $190 a share. The analysts said they haven’t changed their minds about Wingstop’s fundamentals but are making the move based on valuation.
Shares of Wingstop are up 26.9% so far this year. They rose 0.3% on Friday. The new price target implies 9% upside from current levels.
“WING appears very well positioned in the near term and remains among the most compelling long-term growth stories in Restaurants,” BMO said in a research note on Friday. “However, we believe the market is better appreciating WING’s positives with shares at current levels and, to be fair, 2H growth likely will be more muted.”
The stock jumped this week after Wingstop’s earnings report beat expectations on same-store sales growth, which was up 8.7%. Adjusted profit also beat expectations. The restaurant chain that specializes in chicken wings with a variety of sauces is getting a boost because the price of wings has fallen sharply from the same time a year ago.
It recently added a chicken sandwich to its menu offerings, the latest chain to jump on the popularity of the item. That also makes room for Wingstop to expand with other boneless chicken food offerings, including chicken tenders.
BMO analysts said they believe the market is appreciating the positives, noting that second half growth could be muted compared to last year’s second half, which included the sandwich launch and a partnership with Uber (NYSE:UBER) Eats.
Thanks to the sandwich, Wingstop sees a path to a boneless menu mix in excess of 50%, BMO noted, “which would potentially yield long-term food costs in the low 30% range.”
Delivery is also a growth opportunity, the analysts said. The Uber Eats partnership was added to an arrangement with DoorDash Inc (NYSE:DASH) last year. Delivery is about 30% now but Wingstop sees the potential to double that.
