Summary
Since July 31, Wingstop has risen 47%.
Strong results, domestic and international expansion plans, and other tailwinds led to optimism and enthusiasm for WING's prospects.
Wingstop has a strong concept, tailwinds, and a trendy product, but other trendy restaurant stocks have risen rapidly in the past, only to stumble due to over-expansion or other hiccups.
Over 100% gain this year and near vertical price movement since July result in a likely low return going forward. Unrealistic optimism today could result in less than 5% annualized return even if earnings quadruple over the next 10 years.
Wingstop (WING) is a rapidly expanding chain with a simple yet trendy concept: Chicken wings and "boneless wings" (basically chunks) with a variety of sauces, fries, and soft drinks. The current "Big Night in Bundle" promotion emphasizes 25 takeaway/to-go or delivery friendly wings and dips for $15.99, riding the rising tide of food delivery options. While Wingstop seems to be hitting on all cylinders, it has an aggressive growth line with both domestic and international plans; I fear they are the next "trendy" restaurant story stock. The restaurant landscape is littered with such story stocks with overly optimistic growth trajectories causing inflated prices and eventual problems including bankruptcy and reorganization. I'm not predicting a collapse in the stock. At its current valuation, too much optimism and much of the future growth seems to already be priced into the stock, and investors may only earn a mid-single digit annual return.
