Guzman y Gomez's (ASX:GYG) stronger-than-anticipated same-store sales growth and earnings margins can surprise the market positively, UBS said, according to multiple media reports released Wednesday.
Despite GYG's elevated enterprise value, potential earnings upgrades and higher valuation support balanced the Mexican food chain's risk-reward profile, UBS Analyst Shaun Cousins reportedly said.
Menu innovation, expanded daypart participation, growth in delivery services, and extended opening hours drive the company's sales growth, Cousins noted, adding that the company is expected to benefit from less demanding year-on-year comparisons for the rest of fiscal 2025.
Cousins also remains confident in GYG's long-term growth potential for new store openings, as the company has achieved half of its target for fiscal 2025.
UBS upgraded Guzman y Gomez to neutral from sell and increased its price target to AU$40 from AU$37.
Shares of the restaurant chain rose past 6% in recent Wednesday trade.
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