B-Dubs Will 'Fly Higher,' Oppenheimer Says

In a report published Wednesday, Oppenheimer analyst Brian Bittner upgraded the rating on Buffalo Wild Wings (NASDAQ: BWLD) from Perform to Outperform, while establishing a price target of $230. The analyst expects the stock to "fly higher" over the coming 12 months.

With revenue growth expected in the low-20 percent range, along with expectations of margin expansion, the analyst believes that there could be upside to the consensus estimates for 2016. The analyst expects every 1000 bps of margin expansion to add 14 percent to the EPS, while comps are likely to remain healthy.

The analyst cautioned investors to not be "spooked" by the 2016 guidance, which at the usual 20 percent level.

In addition, according to the Oppenheimer report, "BWLD has under-the-radar transformed into a free cash flow machine that could generate ~$130M in FCF in ‘16E. This could be used for a first-ever share repurchase program or more accretive franchise acquisitions, neither of which is modeled or expected by the Street."

Also, while unit growth appears to be slowing, the analyst does not expect it to be the cause of any near-term concern.

"Its double digit EPS algorithm should be sustainable for many years, international is just sprouting and smaller concepts are being tested with capital capacity for more exciting/impactful acquisitions in the future," Bittner stated.

The stock valuation is still attractive, as is the risk/reward, compared to the peer group, especially given Buffalo Wild Wings' "top-tier SSS and unique earnings upside," Bittner added.

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