Chicken wing restaurant chain Wingstop is Monday's pick for IBD 50 Growth Stocks To Watch. Wingstop stock completed a bullish pattern on Friday, offering investors a new buy point.
The fast-food eatery specializes in spicy chicken wings, along with chicken sandwiches and sides. The Texas-based company opened 65 net new locations in the first quarter, bringing the total number of global locations to 2,279 as of March 30.
Wingstop stock ranks No. 5 out of 53 stocks in the retail-restaurants group. The group ranks a high No. 9 out of the 197 Investor's Business Daily industry groups. Wingstop also is an IBD Leaderboard Sector Leader.
Wingstop Stock Soars High
The restaurant stock gave back morning gains and closed down 0.9% in Monday's session. On Friday, Wingstop stock completed a bullish three-weeks-tight pattern with a 400.99 buy point, according to MarketSurge pattern recognition. The entry is also its all-time high, reached on May 10.
Shares have soared since it broke out of an early stage cup base with a 223.77 buy point in November. The stock rode its 10-week moving average up, with several tests in April.
Wingstop stock dipped 0.2% in heavy volume on May 1, after the company's first quarter earnings report. Shares have traded mostly sideways and formed the new pattern as volume has been tapering. The restaurant stock has climbed around 51% this year so far.
Earnings Growth Robust But Slipping
Wingstop topped first quarter earnings and sales estimates in early May. Its adjusted earnings growth accelerated to 66% over the prior year's same period, and was up from 53% and 7% in the prior two quarters. Sales growth also picked up steam, and increased 34% in the first quarter from 26% and 21% in the previous two periods.
"Our fiscal first quarter 2024 showcased the momentum behind the Wingstop brand and the continued strength of our strategies, delivering 21.6% domestic same-store sales growth driven almost entirely by transaction growth," Chief Executive Michael Skipworth said in the company's earnings release.
The company also raised its domestic full-year 2024 same-store sales growth to low double digits from mid-single-digit growth.
FactSet estimates show second-quarter profit growth decelerating to 36%, followed by 20% and 28% in the next two periods. Full-year 2024 profit growth is expected to continue its two-year trend of greater than 30%. Analysts see profit increasing 37% this year before sliding to 22% in 2025.
Double-Digit Sales Growth
Meanwhile, analyst forecasts show second-quarter sales growth of 30% then ease to 24% and 20% in the third and fourth quarters.
Mutual funds own a high 72% of the restaurant stock, with 760 owning Wingstop shares in March. That's up from 720 in December and 636 in September.
Its IBD Accumulation/Distribution Rating of B indicates institutions have been moderately buying shares over the last 13 weeks. Wingstop stock boasts a 97 out 99 possible IBD Composite Rating and a 96 Earnings Per Share Rating.
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