The stock market correction might still be in its early stages, but already, several growth stocks have taken significant hits from their previous highs. Wingstop, for instance, has seen its shares tumble 52% since reaching their peak last fall. Investors have been jittery due to a mix of factors: declining consumer confidence, underwhelming 2025 forecasts, and the company falling short of top-line expectations in their fourth-quarter earnings report. Moreover, a rather lofty valuation contributed to the sell-off, as just half a year ago, the stock seemed priced as if flawless performance was a given.
Now that prices have adjusted, Wingstop appears poised as an appealing investment opportunity. Let me highlight three compelling reasons why.
First up, Wingstop boasts an impressive growth record. In the fast-paced restaurant industry, success tends to breed more success, and Wingstop is living proof. Dominating as the nation’s largest fast-food chicken wing chain, it employs a smart strategy of opening outlets in less costly real estate, maintaining affordable operations for franchise owners, and leveraging digital and delivery sales.
Wingstop has achieved 20 consecutive years of same-store sales growth — a run that withstood both the financial crisis and the pandemic, a rarity in the foodservice industry. Remarkably, the chain has regularly posted double-digit growth in many of those periods. In the fourth quarter alone, they saw a 10.1% increase in domestic same-store sales, with an impressive 19.9% growth for the year, building on an 18.3% rise in 2023, making for a two-year comparative growth over 40%.
Such sustained expansion suggests a strong product and brand connection with consumers. Wingstop’s ability to maintain solid same-store sales growth even as it opens new locations shows there’s no significant worry of existing stores losing business to newcomers.
Secondly, their 2025 guidance might be understated. Wingstop’s stock dropped 13% on February 20th, continuing on this downward trajectory due to fourth-quarter earnings missing top-line projections and rather modest guidance for 2025. Management projected low-to-mid single-digit same-store sales growth, a substantial drop from 19.9% in 2024 and the 10.1% noted in the fourth quarter. The explanation during an earnings call highlighted that they were lapping extraordinarily high growth figures from 2024, especially the initial quarter’s 20% growth.
However, early-year forecasts often lean conservative, and Wingstop is known for this approach. In the fourth quarter of 2023, they anticipated mid-single-digit growth but ultimately shattered that expectation with a 20% surge. Leadership generally sets feasible targets, and while this doesn’t guarantee Wingstop will outperform expectations again, it doesn’t justify skepticism alone.
Finally, Wingstop has a long runway for growth ahead. The company is expanding swiftly both domestically and internationally. Its franchise model allows for rapid establishment in new markets, opting for smaller locations that other chains might overlook. In 2024, Wingstop opened 349 new restaurants, amassing 2,563 locations, and plans for another 14-15% increase in 2025. Even with modest same-store sales growth, new outlets can fuel overall expansion.
Internationally, with just a few hundred locations, Wingstop is primed to emulate successful chains like KFC, pushing beyond the borders. They aim to reach 7,000 locations globally, about threefold their current presence, and might increase this target if strong sales persist and franchisees demand more.
Looking at the bigger picture, Wingstop now sports a more reasonable valuation post-correction, with a price-to-earnings ratio of 56. This seems justified given the company’s growth trajectory. While 2025 might have its challenges, should Wingstop surpass its same-store sales targets, the potential for strong performance is there. Long term, Wingstop appears well-situated for robust growth, both in business terms and as a stock investment.
