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Wedbush analysts told investors in a note that it rarely pays to own WING in a rising wing cost environment.
“We continue to view Wingstop’s business model as among the best positioned to sustain long-term market share gains. However, as wing costs increase, we believe the risk to medium-term SSS growth expectations also increases,” they wrote.
The “wing cost outlook has turned unfavorable,” they added. “After an $0.82/lb trough from 5/1-6/21, wing costs have gradually moved up >30% to $1.10/lb as of 7/27. While still favorable vs. historical levels, wing costs are at a level that puts 2H:23 and 2024 COGS estimates at risk, particularly should the seasonal strength into football season through March Madness take place.”
The analysts also stated that an inflated wing cost environment could cap WING’S medium-term unit growth and valuation.
