On Wednesday, an analyst from Stephens revised the stock price target for Portillo's, Inc. (NASDAQ:PTLO), a fast-casual restaurant chain, reducing it to $18 from the previous $20, while keeping an Overweight rating on the stock. The adjustment follows Portillo's first-quarter results for 2024, which fell short of expectations in terms of sales, store-level margins, and adjusted EBITDA.
The analyst noted that the market is currently favoring restaurant operators that are reporting positive same-store sales driven by increased customer traffic. Given this trend, Portillo's shares might face some ongoing near-term challenges.
Despite this, there was a positive response to the company's announcement that it expects to reduce build costs by approximately $1 million for its new restaurant prototype, which is anticipated to open in the fourth quarter of 2024.
Portillo's reaffirmed its confidence in achieving positive low single-digit percentage growth in same-store sales for the full year 2024. This outlook is based on the expectation that sales will recover from the weather-related downturn experienced in the first quarter.
The revised $18 stock price target is based on approximately 16 times the firm's estimated EBITDA for Portillo's in FY24. This valuation would place the company's multiple in line with its quick-service restaurant (QSR) peers and at a three-turn discount to the average trading multiple since the company's initial public offering.
InvestingPro Insights
Portillo's Inc. (NASDAQ:PTLO) has been navigating a challenging market environment, with recent data from InvestingPro underscoring some key financial metrics and market sentiments. The company's market capitalization stands at $776.67 million, and it is trading at a P/E ratio of 30.75, which adjusts to 27.32 on a last twelve months basis as of Q1 2024.
Despite the pressures, the company has maintained a revenue growth rate of 13.31% over the last twelve months leading up to Q1 2024, which may signal resilience in its business model.
Two notable InvestingPro Tips for Portillo's include the stock being in oversold territory according to the RSI, and the fact that it is trading near its 52-week low. These insights could be particularly relevant for investors considering the stock's potential for a rebound, especially in light of the company's efforts to reduce build costs for its new restaurant prototype.
Analysts on InvestingPro also predict that the company will be profitable this year, which aligns with the company's own confidence in achieving positive growth in same-store sales.
For those interested in deeper analysis, InvestingPro offers additional tips on Portillo's, which could provide further guidance on investment decisions. Readers can take advantage of a special offer using the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, providing access to a comprehensive suite of investment tools and insights.
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