TD Cowen analyst Andrew Charles upgraded the rating on First Watch Restaurant Group (FWRG – Research Report) to a Buy today, setting a price target of $22.00.
Andrew Charles has given his Buy rating due to a combination of factors that suggest a favorable risk/reward scenario for First Watch Restaurant Group. He anticipates that 2025 will be a year of improved same-store sales, driven by enhanced and more effective marketing strategies, as well as an increase in marketing expenditure. The company’s marketing spend as a percentage of revenue is notably low compared to industry standards, indicating potential for growth.
Additionally, Charles notes that First Watch is overcoming the sales challenges faced in 2024, with positive trends in key markets like Florida and improvements in third-party delivery traffic. He also highlights the potential upside in adjusted EBITDA estimates, particularly with the decline in egg prices, which could alleviate some of the commodity inflation pressures. Furthermore, the opportunity for general and administrative leverage presents a significant advantage, positioning the company for better financial performance in the coming years.