Balancing Near-Term Challenges with Long-Term Potential: A Hold Rating for The ONE Group Hospitality

Analyst Nick Setyan of Wedbush maintained a Hold rating on The ONE Group Hospitality (STKS – Research Report), boosting the price target to $6.00.

Nick Setyan has given his Hold rating due to a combination of factors surrounding The ONE Group Hospitality’s current performance and future prospects. The company’s near- to medium-term same-store sales (SSS) growth and margin visibility are limited, which is further complicated by the financial costs associated with the recent acquisition of Benihana. However, the longer-term potential of the company’s growth brands, especially STK, appears promising, balancing out the immediate concerns.
The first quarter earnings per share (EPS) fell short of expectations due to weaker SSS growth and an underperforming operating leverage (UL) margin. Despite the revision of 2024 top-line guidance post-acquisition and ongoing cost savings initiatives, the visibility into future performance remains unclear. This, coupled with the current consumer spending pressures and sales volatility, has led to a cautious outlook. Nonetheless, Setyan acknowledges the strategic efforts to promote value and premium product trade-ups, which may bode well for the company in the longer term.

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The ONE Group Hospitality (STKS) Company Description:

The ONE Group Hospitality, Inc. engages in the development, owning, and management of restaurants and lounges. It operates through the following segments: Owned Restaurants; Owned Food, Beverage, and Other; and Managed and Licensed Operations. The Owned Restaurant segment consists of leased restaurant locations and competes in the full-service dining industry. The Owned Food, Beverage, and Other segment comprises operations such as leased restaurant location and food and beverage agreement at the same location, hotel, and offsite banquet offerings. The Managed and Licensed Operations segment includes operations for which a management, incentive, and license fee is received. The company was founded by Jonathan Segal on December 3, 2004 and is headquartered in New York, NY.