Wingstop downgraded at Wedbush as wing cost outlook turns ‘unfavorable’

Wingstop's stock downgraded by Wedbush as rising wing costs pose risks to market share gains and future growth predictions.

Wedbush cut the price target for Wingstop (NASDAQ:WING) from $240 to $185 and changed the rating from Outperform to Neutral on Friday.

In a note to investors, Wedbush analysts said that when wing costs are going up, it rarely pays to own WING.

“We still think that Wingstop‘s business plan is one of the best ones for making long-term gains in market share. But as wing costs go up, we think the risk to SSS growth predictions over the next few years also goes up,” they wrote.

The “wing cost outlook has turned unfavorable,” they said. “After hitting a low of $0.82/lb from 5/1 to 6/21, wing prices have slowly gone up by more than 30% to $1.10/lb as of 7/27. Even though wing costs are still low compared to historical levels, the predictions for 2H:23 and 2024 COGS are at risk, especially if football season and March Madness are strong.

The experts also said that high wing costs could limit WING’s unit growth and valuation in the middle term.

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