(Bloomberg) -- Wingstop Inc. is falling Wednesday despite a strong earnings report as investors increasingly fear inflationary risks as the price of chicken wings keeps rising.
The Dallas-based chain saw its shares plunge as much as 10% at the open before bouncing back. They were down 4.5% at around noon. Price hikes could pressure its future earnings, and the company also faces reduced consumer spending and increased competition, according to CL King analyst Todd Brooks, who maintains a buy rating on Wingstop.
Average chicken wings prices have increased more than 50% since 2020, according to data from the U.S. Department of Agriculture. Wingstop Chief Executive Officer Charlie Morrison addressed pricing concerns during the earnings conference call, assuring investors that the company’s streamlined kitchen operations and revenue “will help our brand partners continue to navigate this current inflationary environment.”
The dip came in spite of the company’s second-quarter earnings and revenue topping average analyst estimates. The stock has gained more than 22% this year, outperforming its benchmarks the S&P 500 and S&P Midcap 400, and many analysts still see Wingstop as undervalued.
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