What Happened?

Shares of casual sandwich chain Potbelly (NASDAQ:PBPB) fell 15.9% in the morning session after the company reported weak fourth-quarter results, with its Q1 2025 same-store sales guidance falling short of expectations, raising concerns about slowing demand. On the bright side, earnings per share blew past expectations, and EBITDA easily topped Wall Street's estimates. Management remained optimistic about long-term growth, projecting full-year same-store sales growth of 1.5% to 2.5% and planning at least 38 new store openings. Overall, this was a mixed quarter, and the weaker-than-expected areas appear to be driving the market's reaction.

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What The Market Is Telling Us

Potbelly’s shares are somewhat volatile and have had 13 moves greater than 5% over the last year. But moves this big are rare even for Potbelly and indicate this news significantly impacted the market’s perception of the business. 

The biggest move we wrote about over the last year was about 2 months ago when the stock gained 14.8% on the news that the company reported strong preliminary Q4 2024 guidance. Same-store sales were projected to grow slightly by 0.2% to 0.3%, a sharp turnaround from the earlier forecasted decline of 2.5% to 0.5%. Adjusted EBITDA was expected to reach between $8.0 million and $8.4 million, up from the previous estimate of $7.0 million to $8.0 million. Management expressed positive sentiment about the improvements in both sales and profits and plans to add 38 new shop sites in 2025 to better meet rising market demand. Overall, the results underscored management's improved execution capabilities.

Potbelly is up 6.2% since the beginning of the year, but at $9.95 per share, it is still trading 26.3% below its 52-week high of $13.50 from March 2024. Investors who bought $1,000 worth of Potbelly’s shares 5 years ago would now be looking at an investment worth $2,597.

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