In a report released today, Nick Setyan from Wedbush maintained a Hold rating on The ONE Group Hospitality (STKS – Research Report), with a price target of $5.25.
Nick Setyan’s Hold rating for The ONE Group Hospitality’s stock is influenced by a multitude of factors. The present valuation of STKS is seen as a fair representation of the lack of short to medium-term Same Store Sales (SSS) growth and margin visibility, contrasted with the potential long-term appeal of its brands. Q3 results were below expectations, with both STKS and Kona brands showing less SSS growth than anticipated and STKS’ adjusted EPS falling short of consensus. Furthermore, the revenue from licensed/managed entities was below consensus, and the Underlying (UL) margin was also underwhelming compared to the consensus.
Setyan has also noted that the company’s visibility remains limited as it shifts its focus to value. The estimated total revenue for 2023 has been reduced and consumer trade-downs occurring at both brands are likely to continue exerting pressure on the mix. Additionally, the limited visibility of the top line also obscures the margin trajectory. Measures are being taken to cut costs and as new units open, staff training costs are expected to stabilize. However, Setyan has reduced his UL margin estimate for Q4 and 2023. Despite the slow but steady progress in unit development, the overall outlook led Setyan to lower his EPS estimates for both 2023 and 2024.
According to TipRanks, Setyan is a 4-star analyst with an average return of 5.8% and a 47.68% success rate. Setyan covers the Consumer Cyclical sector, focusing on stocks such as Wendy’s, BJ’s Restaurants, and Brinker International.
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The ONE Group Hospitality (STKS) Company Description:
The ONE Group Hospitality, Inc. engages in the development, owning, and management of restaurants and lounges. It operates through the following segments: Owned Restaurants; Owned Food, Beverage, and Other; and Managed and Licensed Operations. The Owned Restaurant segment consists of leased restaurant locations and competes in the full-service dining industry. The Owned Food, Beverage, and Other segment comprises operations such as leased restaurant location and food and beverage agreement at the same location, hotel, and offsite banquet offerings. The Managed and Licensed Operations segment includes operations for which a management, incentive, and license fee is received. The company was founded by Jonathan Segal on December 3, 2004 and is headquartered in New York, NY.
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