2 Different Takes On B-Dubs Ahead Of Earnings

Shares of Buffalo Wild Wings (NASDAQ: BWLD) continue trading near multi-year lows, but could stage a rebound ahead of the company's second-quarter earnings report scheduled for July 26.

UBS Sees Upside To $175

Investors remain focused on a few key factors that would support B-Dubs' growth, including an inflection in same-store sales and margins and restaurant development, UBS' Dennis Geiger said in a report. The company could succeed in delivering on these improved metrics going forward, which prompted the analyst to maintain a Buy rating on the stock with an unchanged $175 price target.

First, competitive overlap in the restaurant sector remains relatively low for B-Dubs with an average location competing against roughly six other casual diners, which is better than the peer group average of eight, the analyst explained. Cannibalization and own-store overlap also appears to be "manageable" as there is a 15 minute separation between each B-Dubs location which is in line with peers.

Second, there are just 1,250 total units that represents 70 percent of the company's target of 1,700 North American stores, which implies a path ahead towards unit growth. Meanwhile, the company is experimenting with "B-Dub Express" concepts that could total 200 or more locations.

Finally, a focus on value, improvements in lunch offerings, takeout initiatives, digital and loyalty efforts and delivery options should support a same-store sales improvement in 2017. Over the longer term, the company could succeed in reporting a system same-store sales of low- to-mid single digit.

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Bottom line, an improvement in same-store sales remains a "show-me story" but the stock's current valuation appears to be compelling given a solid long-term growth story with optionality, Geiger concluded.

Cannacord: Not So Fast

Analysts at Cannacord Genuity turned incrementally bearish on Buffalo Wild Wings as it faces many near-term challenges. Lynne Collier maintains a Hold rating with a price target slashed from $160 to $135.

Some of the immediate challenges the company will have to navigate include "stubbornly high" chicken wing prices, ongoing promotional activity spending and a poor industry wide trend among all casual dining chains concerning June traffic.

Over the near term, B-Dubs will have to face the prospect of continued high chicken wing prices and a change to its promotional strategy away from half-price Tuesdays towards a buy-one-get-one-free promotion, Collier continued. Meanwhile, the company is likely testing a reduction in the number of wings that it serves per order.

All of these concerns combined will likely keep shares range bound and investors should consider remaining on the sidelines.