The stock market correction hasn't gone on very long, but there are more than a few growth stocks that are well off their highs.
Wingstop (WING +3.57%) is one of them. Shares of the fast-food wing slinger are now down 52% from their peak last fall, as investors have been spooked by weakening consumer sentiment, disappointing 2025 guidance, and missing top-line estimates in its fourth-quarter earnings report. A lofty valuation also accelerated the sell-off, as the stock was priced for perfection six months ago.
However, after the price reset, Wingstop looks set up for an attractive buying opportunity. Here are three reasons why.
Image source: Wingstop.
1. It has an impeccable track record of growth
In the restaurant industry, winners tend to keep winning, and Wingstop's success is a testament to that. The company is easily the nation's largest fast-food wing concept, and its model of opening in B-level real estate locations, keeping costs low for franchisees, and relying on digital and delivery channels has paid off.
Wingstop has delivered 20 straight years of same-store sales growth, a streak that includes the financial crisis and the pandemic and is virtually unmatched in the restaurant industry. The company has also reported double-digit comparable-sales growth in many of those quarters.
In fact, in the fourth quarter, it posted 10.1% domestic same-store sales growth and 19.9% same-store sales growth for the year, on top of 18.3% in 2023, giving it a two-year comp of more than 40%.
A restaurant chain that's able to grow at a rate like that clearly has a product and brand that's resonating with its customer base. Additionally, Wingstop has been able to grow same-store sales in double digits while aggressively opening new locations, showing that cannibalization has not been an issue.
2. 2025 guidance is likely conservative
Wingstop stock fell 13% on Feb. 20, and continued to slide from there as the company missed top-line estimates in its fourth-quarter earnings report and offered disappointing guidance for 2025.
Management said that it expected low-to-mid-single-digit same-store sales growth in 2025, a sharp slowdown from 19.9% in 2024 or 10.1% in the fourth quarter. On the earnings call, the company explained that that guidance was primarily due to lapping very strong growth in 2024, including 20% growth in the first quarter in 2024.
However, full-year guidance to start the year tends to be conservative for most companies, and Wingstop has a pattern of doing that as well. In fact, in the fourth quarter of 2023, the company guided for mid-single-digit comparable-sales growth, and clearly blew that away with 20% comperable-sales growth.
Management teams generally give targets they're confident they can hit. That doesn't mean that Wingstop will blow past its guidance again, but that forecast isn't a reason in and of itself to doubt the company.
NASDAQ: WING
Key Data Points
3. It still has a long runway of growth
Wingstop is rapidly expanding in both domestic and international markets, and the company's franchise model allows it to open stores quickly in new markets and in small-footprint locations that other restaurant chains might avoid.
Wingstop opened 349 net new restaurants in 2024, bringing its grand total to 2,563 locations, and it expects to grow its base by another 14%-15% in 2025, showing that even if its same-store sales growth is modest, the company can still deliver growth through new stores.
The company only has a few hundred stores in international markets, and it can follow in the footsteps of successful fast-food chicken brands like KFC (owned by Yum! Brands) by expanding abroad.
Wingstop is currently targeting 7,000 locations globally, about triple what it has today, and the company could lift that target if same-store sales continue to be robust and there's demand from franchisees.
A great buying opportunity
Wingstop's valuation looks much more reasonable after the recent pullback, as it trades at a price-to-earnings ratio of 56, which seems reasonable for a company with its growth potential.
While market headwinds could persist in 2025, Wingstop could also soar again if it can beat its same-stores sales guidance for the year. Long term, the company looks well-positioned for market-beating growth, both as a business and a stock.
