On Tuesday, Jefferies made adjustments to its outlook on Portillo's, Inc. (NASDAQ:PTLO), reducing the price target to $19.00 from the previous $21.00. Despite the price target reduction, the firm continues to recommend a Buy rating on the stock. The adjustment follows Portillo's report of a slight EBITDA miss in the first quarter, with same-store sales (SSS) declining by 1.2% compared to the consensus expectation of a 1.1% increase. The shortfall in SSS was attributed in part to the impact of winter weather, which significantly reduced traffic during certain weeks.
The restaurant chain also reported a miss on restaurant-level margin (RLM), although this was partially mitigated by lower general and administrative (G&A) expenses. Looking forward, the company has seen improved trends in April, with low single-digit percentage increases in SSS. Portillo's has maintained its full-year guidance for SSS growth at a low single-digit percentage, and its view on RLM is approximately in line with expectations.
Jefferies noted that while there are opportunities on the horizon that could lead to upside and better financial flow-through for Portillo's, a cautious approach is warranted in the current difficult traffic environment. Consequently, the firm has revised its estimates and price target downward, but reiterates its Buy rating, citing the stock's favorable risk/reward profile at approximately 11 times EBITDA.
The analyst from Jefferies believes that despite the challenges faced by Portillo's, including adverse weather effects and a tough traffic environment, the company's stock remains an attractive investment. The firm's outlook suggests confidence in the company's potential to capitalize on future opportunities that could enhance its financial performance.
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