Wingstop has 'multiple fundamental levers': Goldman Sachs

Investing.com -- Goldman Sachs analysts upgraded Wingstop Inc (NASDAQ:WING). to Buy from Neutral on Friday, projecting a 22% upside with a new 12-month price target of $377.

Despite a recent 25% drop in stock value—contrary to the S&P 500's 3% rise—Goldman Sachs sees "multiple fundamental levers" supporting Wingstop's continued growth, even as investors raise concerns over slowing same-store sales growth (SSSG) in 2025.

Analysts anticipate Wingstop will achieve 7% SSSG in 2025, outpacing consensus by around 150 basis points.

This expected growth is said to be underpinned by increasing brand awareness, a strong digital presence, and higher guest frequency.

The bank sees a "continued step-up in brand awareness, digital transformation, and increased guest frequency."

They state that the company's strategic push for brand awareness is clear, with advertising expenses doubling from 2021 to 2023 and increasing an additional 43% year-over-year in the first three quarters of 2024.

Wingstop's recent partnership with the NBA as the league's "Official Chicken Partner" further strengthens its visibility, presenting a catalyst to close the brand awareness gap with competitors like Chipotle (NYSE:CMG), according to Goldman.

They believe Wingstop's digital edge is another significant growth driver. With 45 million unique users in its customer database and digital sales comprising approximately 70% of total sales, Wingstop "ranks top quartile" in Goldman Sachs (NYSE:GS)'s digital scorecard.

The introduction of MyWingstop, a proprietary tech platform offering personalized digital experiences, aims to enhance customer frequency and engagement.

Lastly, Wingstop's unit economics offer is seen as providing robust returns for franchisees, with average unlevered cash-on-cash returns of around 70% and a payback period of two years.

Goldman Sachs' analysis shows potential for Wingstop to expand to 6,000 U.S. units and 10,000 globally, about 2.7x and 4x its current footprint.