On Wednesday, Stifel has adjusted its outlook on Portillo’s Inc (NASDAQ:PTLO), lowering the price target to $15 from the previous $20 while sustaining a Buy rating on the stock. The revision follows Portillo’s reported first-quarter comparable sales that fell short of the average analyst expectations, posting a 1.2% decline against the projected 1.1% increase. Despite this, the firm’s analyst noted that the results were not entirely unexpected due to recent comments from others in the industry.
The concern from investors regarding Portillo’s was primarily focused on the performance of new units, which seemed to contribute minimally to first-quarter revenue. However, the analyst underscored that the new unit volumes were not weak and remained in line with the company’s targets.
The need for a revised method to estimate the revenue contribution from new units was acknowledged, particularly given the weight of new unit performance in the investment outlook for Portillo’s.
Furthermore, the company demonstrated commendable cost management during the quarter. This, along with stable returns from new units and signs of improving traffic and mix trends, has reinforced Stifel’s confidence in maintaining a Buy rating for the stock.
This stance is also supported by the current valuation of Portillo’s shares, which are trading at a multiple of 15 times enterprise value to earnings before interest, taxes, depreciation, and amortization (EV/EBITDA).
InvestingPro Insights
In light of Stifel’s recent price target adjustment for Portillo’s Inc (NASDAQ:PTLO), real-time data and InvestingPro Tips offer additional context that may be valuable for investors. According to InvestingPro, Portillo’s operates with a substantial debt burden and the Relative Strength Index (RSI) indicates that the stock is currently in oversold territory. This could suggest a potential rebound, aligning with Stifel’s maintained Buy rating despite the recent sales miss.
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From a valuation perspective, the stock is trading at a P/E ratio of 30.75, which adjusts to 27.32 on a last twelve months basis as of Q1 2024. This is notably low relative to the company’s near-term earnings growth, with a PEG ratio of just 0.36, indicating that the stock may be undervalued when considering its growth potential. Moreover, with a market capitalization of $776.67 million and a price/book ratio of 2.15, Portillo’s financials…
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