Benchmark analyst Todd Brooks adjusted the price target for Red Robin Gourmet Burgers (NASDAQ:RRGB) to $10, a decrease from the previous target of $16, while maintaining a Buy rating on the stock. The revision followed Red Robin's second-quarter financial results, which were released on Thursday, August 22, 2024. The company's revenue reached $300 million with a restaurant-level operating margin (RLOM) of 11.8%, and adjusted earnings per share (EPS) at a loss of $0.48.
These figures were marginally below the consensus expectations but slightly above the analyst's recently reduced estimates.
Red Robin's performance reflected broader industry trends, with macroeconomic pressures intensifying throughout July. However, the company's same-store sales (SSS) showed improvement in August. The results were supported by an additional $6.6 million in income from loyalty program breakage, coinciding with the launch of an upgraded loyalty program in May.
The management team at Red Robin has revised its forecast for the full fiscal year 2024, now anticipating adjusted EBITDA to be between $40 million and $45 million.
Despite the reduction in the price target, the analyst underscored that Red Robin's operational improvements from strategic transformation efforts are evident and align with, or even exceed, expectations.
Consequently, the Buy rating remains in place. However, the new price target of $10 reflects a lower valuation multiple of 5 times the analyst's revised adjusted EBITDA estimate for fiscal year 2025, which stands at $56.8 million.
The company reported an adjusted loss of $0.47 per share, missing analyst estimates. However, revenue results were slightly more positive, reaching $300.2 million and surpassing expectations. In addition, Red Robin has lowered their full-year guidance, now expecting a total revenue of approximately $1.25 billion for fiscal 2024. This forecast indicates minimal growth from the previous year but aligns closely with consensus estimates.
The company has also adjusted its EBITDA forecast to a range of $40-$45 million. In other developments, Red Robin amended its credit agreement to revise financial covenants and expand revolver capacity, providing additional flexibility for its ongoing turnaround strategy.
InvestingPro Insights
As Red Robin Gourmet Burgers (NASDAQ:RRGB) navigates through its financial challenges, the latest data from InvestingPro provides a snapshot of the company's current market position. With a market capitalization of approximately $74.19 million, Red Robin's financial health is under scrutiny, particularly with a negative P/E ratio of -2.8, signaling investor concerns about profitability. The company's revenue for the last twelve months as of Q2 2024 stands at $1.275 billion, with a slight quarterly revenue growth of 0.5%. However, the gross profit margin during the same period is relatively low at 13.45%, which aligns with the InvestingPro Tip that Red Robin suffers from weak gross profit margins.
InvestingPro Tips also highlight that the company is quickly burning through cash and carries a significant debt burden, which could be contributing factors to the stock's volatility and its trading near the 52-week low. It's worth noting that analysts have revised their earnings downwards for the upcoming period, and they do not anticipate the company will be profitable this year. These insights are crucial for investors considering Red Robin's stock, especially in light of the recent price target adjustment by Benchmark analyst Todd Brooks.
For those looking to delve deeper into the company's prospects, there are additional InvestingPro Tips available, offering a comprehensive analysis of Red Robin's financial health and market performance. To explore these insights, visit https://www.investing.com/pro/RRGB.
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