Wingstop (WING), the fast-growing chicken wing chain, has carved out a unique niche in the competitive quick-service restaurant (QSR) industry, boasting a remarkable growth trajectory over the past decade.

However, WING stock has faced turbulence in 2025, with a nearly 50% decline over the past six months, despite strong fundamentals. Yet even with the headwinds, the potential for a rebound reveals a compelling case for investors with a long-term perspective.

Sales Flying the Coop?
Wingstop’s fourth-quarter earnings underscored its robust performance. The restaurant achieved a 27% increase in sales to $162 million, slightly below the $165 million consensus estimate, but driven by system-wide sales growth of almost 37% to $4.8 billion.

Domestic same-store sales grew 10.1%, missing the expected 10.6%, yet marking its 21st consecutive year of positive comps. Earnings soared 44% to $0.92 per share, exceeding forecasts, while adjusted EBITDA also rose 44% to $56.3 million. Wingstop opened a record 349 net new restaurants in 2024, reflecting 15.8% unit growth, and boosted its digital sales mix to 70%.

For 2025, the company projects low to mid-single-digit same-store sales growth and 14% to 15% unit expansion, aiming for over 10,000 global locations long-term. These figures suggests Wingstop has the ability to scale profitably, even if growth has moderated from prior years’ explosive pace.

Ruffling Some Feathers
Despite these strengths, several factors have fueled the stock’s decline. First, the Q4 revenue and same-store sales misses, though minor, sparked concerns about decelerating momentum in the U.S., Wingstop’s core market. Inflationary pressures, including rising chicken wing costs and labor expenses, have squeezed margins, with cost of sales climbing to 77.6% of company-owned restaurant sales in Q4 from 75.1% the prior year.

Part of the problem was the culling of hundreds of millions of chickens over the past two years due to an outbreak of avian flu. Yet it hasn’t contained the H5N1 virus, and the reimbursement of poultry producers for their flocks incentivized them to kill more than needed. While it has mostly hit egg producers, rather than meat birds, they have been under pressure as well.

Macroeconomic uncertainty and a softening consumer environment have also weighed on investor sentiment. Wingstop’s premium valuation – it trades at a price-to-earnings ratio of around 60 – has amplified these concerns, as any hint of slowing growth prompts outsized reactions.

BTIG analyst Peter Saleh noted this nearly 50% drop might be an overreaction, suggesting the market has overly discounted Wingstop’s unit economics and long-term potential.

Coming Home to Roost
Looking forward, Wingstop’s rebound prospects appear strong. Analysts at Wells Fargo initiated coverage with an Overweight rating and a $270 price target. They see it as a “best-in-class consumer growth story.”

The company’s growth strategies, including ramping up digital marketing, expanding internationally, and innovating its menu with items like chicken sandwiches, position it to regain traction.

Wingstop should also face easier sales comparisons in the second half of 2025, which, when coupled with significant free cash flow and industry-leading unit economics, bolster this outlook.

Jefferies just upgraded Wingstop to Buy, citing an oversold stock and undervalued growth versus its peers. With a $3 million average unit volume target and a scalable franchise model, Wingstop’s fundamentals suggest resilience.

Key Takeaway
While near-term volatility persists, its proven track record and strategic levers signal a compelling recovery case for patient investors. WING stock hit an all-time high $433 per share last June and has been cut in half since. If chicken prices continue to fall and Wingstop’s investments pay off, we can expect WING stock to take flight again. It might not hit the $400 price level anytime soon, but investors may have finally seen the bottom.

— Rich Duprey

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Source: Money Morning