Potbelly (PBPB) is a Zack Rank #1 (Strong Buy) that is a fast-casual restaurant chain known for its toasted sandwiches, soups, salads, and hand-dipped milkshakes.

The stock has made significant strides since its COVID lows, with earnings momentum on the rise since the pandemic. Now, as it approaches levels not seen since 2018, is it time to dive in and grab some shares?

About the Company

Potbelly is valued at approximately $350 million and employs 5,000 people.

The company started as an antique store in Chicago in 1977 before transitioning into a sandwich shop. Potbelly now operates both company-owned and franchised locations across the U.S., emphasizing a warm, neighborhood-friendly atmosphere with live music in some stores.

The stock has a Zacks Style Score of “B” in Growth and “A” in Momentum. The stock has “C” in Value, with a Forward PE at 45.

Q4 Earnings Beat

Potbelly's Q4 results came in stronger than expected, with a 60% earnings surprise to the upside. The company posted same-store sales (SSS) growth of 0.2-0.3% year-over-year, outperforming the company’s prior guidance of a decline between -2.5% and -0.5%.

Adjusted EBITDA for the quarter also exceeded expectations, reaching $8.0-8.4 million versus the guided range of $7.0-8.0 million.

Potbelly remains focused on accelerating expansion, with 38 new shop locations already in development for 2025 and an additional 30 new franchise commitments secured in Q4, bringing total open and committed locations to 727.

While unit growth came in slightly below target for Q4, the company’s ability to manage costs effectively and drive profitability suggests a strong foundation for future growth. With adjusted EBITDA projected to increase by approximately 10% for the full year, management remains confident in its long-term strategy. If Potbelly can sustain its momentum in sales growth while executing on its expansion plans, 2025 could mark an inflection point for the brand.

The earnings improvement reflects the success of Potbelly’s product innovation, digital marketing efforts, and operational efficiency, which helped drive positive comps and expand restaurant margins.

Estimates Headed Higher

Since earnings, analysts have been lifting estimates and price targets.

For the current quarter, earnings estimates went from $0.04 to $0.06, up 50%.

For the current year, estimates also improved 14%, going from $0.21 to $0.24.

For the next year, analysts now see $0.27, which is up from the $0.24 expected just 90 days ago. 

The Technical Take

The stock struggled since before COVID, falling to new lows in 2019 and being left for dead during the height of the pandemic. A low of $1.50 was the bottom in 2020, and since then it has been a slow climb.

Now the stock is back to its 2018 levels, with investors looking to challenge the 20214 highs. A break above $14, could help the stock trend to the $17 area, about 35% higher from current trading levels.

The stock is up over 30% already this year, so interested buyers can target the moving averages below.

21-day: $11

50-day: $10.30

200-day: $8.80

2025 Fibonacci buy zone (50%-61.8% retracements): $10.30-11

In Summary

With Potbelly delivering strong earnings, upward estimate revisions, and a solid technical setup, the stock appears well-positioned for further gains. While valuation remains a consideration, the company’s growth momentum, expanding footprint, and improving profitability provide a compelling case for long-term investors.

A breakout above key resistance levels could fuel additional upside, with technical targets pointing toward the mid-teens. For those looking to take a bite, keeping an eye on pullbacks to key moving averages may offer strategic entry points.

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