Buffalo Wild Wings (BWLD) Receives Morgan Stanley Downgrade

Updated from 8:36 am EST to include share price action. 

NEW YORK (TheStreet) --Morgan Stanley downgraded Buffalo Wild Wings (BWLD) to "underweight" with an $143 price target. The investment bank said this was a valuation call given the restaurant's share price nearly doubled over 2013. 

Wells Fargo, however, recently picked the chain as one of its top picks for the year. 

By mid-morning, shares had taken of 4.4% to $144.77.

Likewise, TheStreet Ratings team rates BUFFALO WILD WINGS INC as a Buy with a ratings score of A-. The team has this to say about their recommendation:

"We rate BUFFALO WILD WINGS INC (BWLD) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its robust revenue growth, impressive record of earnings per share growth, compelling growth in net income, good cash flow from operations and solid stock price performance. We feel these strengths outweigh the fact that the company shows low profit margins."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth came in higher than the industry average of 0.4%. Since the same quarter one year prior, revenues rose by 27.9%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • BUFFALO WILD WINGS INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, BUFFALO WILD WINGS INC increased its bottom line by earning $3.06 versus $2.73 in the prior year. This year, the market expects an improvement in earnings ($3.73 versus $3.06).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Hotels, Restaurants & Leisure industry. The net income increased by 66.9% when compared to the same quarter one year prior, rising from $10.71 million to $17.87 million.
  • Net operating cash flow has increased to $45.63 million or 13.92% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -0.50%.
  • Powered by its strong earnings growth of 66.66% and other important driving factors, this stock has surged by 97.97% over the past year, outperforming the rise in the S&P 500 Index during the same period. We feel that the stock's sharp appreciation over the last year has driven it to a price level which is now somewhat expensive compared to the rest of its industry. The other strengths this company shows, however, justify the higher price levels.

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