S&P 500   5,130.95
DOW   38,989.83
QQQ   444.02
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Closing prices for crude oil, gold and other commodities
S&P 500   5,130.95
DOW   38,989.83
QQQ   444.02
5 Under-the-Radar Artificial Intelligence (AI) Stocks
Critical asset just had biggest fall on record (Ad)
How major US stock indexes fared Monday, 3/4/2024
Macy's, United Rentals rise; Apple, Spirit Airlines fall Monday, 3/4/2024
Critical asset just had biggest fall on record (Ad)
DeSantis names Disney World district administrator to run elections in Democratic Orange County
Stock market today: World markets are lower after China unveils 5% economic growth target for 2024
This is the #1 Stock to Buy for the AI Tidal Wave (Ad)
Ohio foundation begins process to distribute millions in opioid settlement money
Closing prices for crude oil, gold and other commodities
S&P 500   5,130.95
DOW   38,989.83
QQQ   444.02
5 Under-the-Radar Artificial Intelligence (AI) Stocks
Critical asset just had biggest fall on record (Ad)
How major US stock indexes fared Monday, 3/4/2024
Macy's, United Rentals rise; Apple, Spirit Airlines fall Monday, 3/4/2024
Critical asset just had biggest fall on record (Ad)
DeSantis names Disney World district administrator to run elections in Democratic Orange County
Stock market today: World markets are lower after China unveils 5% economic growth target for 2024
This is the #1 Stock to Buy for the AI Tidal Wave (Ad)
Ohio foundation begins process to distribute millions in opioid settlement money
Closing prices for crude oil, gold and other commodities
S&P 500   5,130.95
DOW   38,989.83
QQQ   444.02
5 Under-the-Radar Artificial Intelligence (AI) Stocks
Critical asset just had biggest fall on record (Ad)
How major US stock indexes fared Monday, 3/4/2024
Macy's, United Rentals rise; Apple, Spirit Airlines fall Monday, 3/4/2024
Critical asset just had biggest fall on record (Ad)
DeSantis names Disney World district administrator to run elections in Democratic Orange County
Stock market today: World markets are lower after China unveils 5% economic growth target for 2024
This is the #1 Stock to Buy for the AI Tidal Wave (Ad)
Ohio foundation begins process to distribute millions in opioid settlement money
Closing prices for crude oil, gold and other commodities

Wingstop due for a correction, but don’t fly the coop

Key Points

  • Wingstop is a high-quality growth name, but its price is due for a correction.
  • Analysts support the stock, but the sentiment slipped to "hold," with a price target lagging the market. 
  • Institutions own nearly 100% of the stock, but rotation and profit-taking are underway. 
  • 5 stocks we like better than Wingstop

Wingstop restaurant exterior and logo. Wingstop Restaurants, Inc. is a chain of restaurants.

There are many reasons to fear a correction in Wingstop Inc. NASDAQ: WING, but investors shouldn't get ready to fly the coop. While a correction is more than due, the trajectory for growth suggests the uptrend will continue following a healthy correction, and this is a quality name in restaurants

In this light, trimming positions and taking profits may be in order, but not a run-for-the-hills style position closeout. 

Why might Wingstop's price action correct to lower levels? 

The stock price is up more than 65% since its last bottom with no appreciable pullback in price action. That creates overbought conditions, which won't lead to correction but set the market up for price weakness. Add to that an incredibly high valuation, slowing growth, bearish signals in the price action, a hurdle in the analysts' sentiment, and the odds of correction grow. 

The question is whether this market will pull back significantly or enter a consolidation phase. 

Highly valued with slowing growth, Wingstop looks ripe to pull back

Regarding value, Wingstop trades at a very high 105x this year's earnings consensus and a whopping 90x next year's. An expectation for solid growth supports the P/E multiple but values the company at twice the rate of Chipotle Mexican Grill Inc. NYSE: CMG, the premium growth name in casual dining. 


Regarding growth, the company is in a hyper-growth phase, but growth is slowing. Growth peaked near 50% last year and slowed to the low 30% range this year. Growth is expected to continue in 2024 but will slow to only 15%, suggesting the market is overvalued. Chipotle trades at 52x this year and 45x next year’s consensus figures while sustaining growth in the teens. 

The charts are sketchy. The daily price action chart shows a bearish engulfing pattern that swallows two weeks of price action and significant divergence in the indicators. The MACD and stochastic have diverged from the new highs, with stochastic trending lower and showing considerable weakness by falling below the upper signal line. 

The risk for bullish traders is that market weakness will lead the stock price to retest the recent support level or lower; the caveat for bearish traders is that a deep correction is far from assured, and there is a high probability this market will move sideways in consolidation. 

Wingstop is a most upgraded stock, but that is only worth so much

The analysts are bullish on this stock and have been raising their price targets all year. Analysts' activity is enough to have the stock ranked on the "most upgraded stocks" list, but their price targets have lagged the market, that is, until now. 

Trading at $250, the stock was right at the high end of the analysts' expected range, a hurdle for sentiment. TD Cowen changed that, which lifted its target to $270, setting the new high end. This opens the door to upward movement in stock prices but could have a limited effect if other analysts do not lift their target. The consensus is still about 17% below the recent highs and may drag on price action until the next earnings report due in mid-February. 

Institutions may tip the balance

Institutions own a considerable amount of Wingstop and will be the deciding factor. Collectively, institutional holdings are 99% of the stock, including significant holdings among index and mutual funds. The balance of activity in Q4 is bullish and helped to lift the market to its current levels, but it is also mixed, suggesting rotation within the group. 

Numerous large holdings were cut by high double-digit percentages in the period, and this type of selling may increase as share prices rise. 

Wingstop chart on MarketBeat

→ Critical asset just had biggest fall on record (From Stansberry Research) (Ad)

Should you invest $1,000 in Wingstop right now?

Before you consider Wingstop, you'll want to hear this.

MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and Wingstop wasn't on the list.

While Wingstop currently has a "Hold" rating among analysts, top-rated analysts believe these five stocks are better buys.

View The Five Stocks Here

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Companies Mentioned in This Article

CompanyMarketRank™Current PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
Chipotle Mexican Grill (CMG)
4.5179 of 5 stars
$2,723.73+1.3%N/A61.41Moderate Buy$2,469.88
Wingstop (WING)
3.3383 of 5 stars
$366.51+0.1%0.24%155.96Hold$253.72
Compare These Stocks  Add These Stocks to My Watchlist 

Thomas Hughes

About Thomas Hughes

  • tmhughes.writeon@gmail.com

Contributing Author

Technical and Fundamental Analysis

Experience

Thomas Hughes has been a contributing writer for MarketBeat since 2019.

Areas of Expertise

Technical analysis, the S&P 500; retail, consumer, consumer staples, dividends, high-yield, small caps, technology, economic data, oil, cryptocurrencies

Education

Associate of Arts in Culinary Technology

Past Experience

Market watcher, trader and investor for numerous websites. Founded Passive Market Intelligence LLC to provide market research insights. 


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