WING has been an interesting story in the restaurant sector over the past 7 years. Wingstop has experienced above-average growth in both top and bottom line figures over this timeframe. Let us explore why this is the case and where the stock may go from here...
Fundamentals: WING's fundamentals are nightmarish. Incredibly high levels of debt (likely why WING has been able to expand so quickly), negative stockholders equity, 17% of shares float are short, a forward P/E of 70, yoy revenue beginning to stall with current year-end revenue expectations up only 2-3% from 2021 year-end. WING's total liabilities make up more than double its total assets. The company is grossly overvalued, Wingstop's intrinsic value is roughly 35-45 dollars a share. This bounce off of earnings is unsustainable, to say the least. The company did not even post a beat, and its shares surge 20%... this move simply does not make sense.
Technicals: Long-term uptrend still intact. This will change if a move below the A trend line occurs. Currently, WING is struggling to break above the short-term bearish trend line labeled as B. A touch at 128.43 resistance and a quick retreat back to trend line B leads me to believe this is a temporary bull run in what is a longer-term downtrend for WING.
Global macro conditions: Tightening of financial conditions, supply chain woes, war, sanctions, Supply crunches in energy commodities, climate crises, hot inflation, political unrest, and sovereign default concerns intensifying -along with other factors- all play a role in a rapidly worsening macroeconomic narrative. These factors are often talked about by economists but I fear they are overlooked in cases such as these when the market rewards a weak growth stock such as WING with a massive bounce in price off of an average earnings report, all during an unprecedentedly difficult global economy.
Targets: Unclear as to when WING will significantly fall in price. I think the deterioration of financial markets over the next few years will be serious- things will get worse and stay worse for longer than expected- and companies with trash fundamentals like WING will be the first to suffer. Needless to say, I would be short WING if given an option. I see a fall to 113.92 as a short-term lock. Longer term I expect a choppy downward trade from lower support levels to lower support levels eventually forming fresh lows at the 49.89 support level. Seems like a bit of a wild prediction I'm sure, but this is what I see.