Lake Street analyst Mark Smith downgraded the rating on Potbelly to a Hold today, setting a price target of $17.12.
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Mark Smith has given his Hold rating due to a combination of factors surrounding Potbelly’s acquisition by RaceTrac. The agreement for RaceTrac to acquire Potbelly at $17.12 per share represents a significant premium over the recent trading price, which makes the deal attractive for shareholders. However, since the offer price is now set, the potential for further stock price appreciation is limited, prompting the downgrade to a Hold rating.
Additionally, the valuation of the deal at a 12.6x EV/EBITDA multiple is considered fair and aligns with the current market conditions. With the directors and management already agreeing to tender their shares, which constitute a notable portion of the outstanding shares, the likelihood of the transaction being completed is high. Therefore, the Hold rating reflects the limited upside potential given the acquisition terms, while acknowledging the fair value offered to shareholders.
In another report released yesterday, Craig-Hallum also downgraded the stock to a Hold with a $17.12 price target.