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Highlights
- Guzman y Gomez shares climb 5.4% to AU$40.395, becoming the top gainer on the S&P/ASX 200 index.
- UBS upgrades its rating from "sell" to "neutral" and raises the price target to AU$40, citing unexpected same-store sales growth and EBITDA margin improvement.
- Expansion plans, menu innovations, and extended opening hours drive optimism for robust earnings growth through FY26 and beyond.
Guzman y Gomez (ASX:GYG), the Mexican-inspired quick-service restaurant chain, emerged as the top gainer on the S&P/ASX 200 index (.AXJO) on Wednesday, with its stock surging 5.4% to close at AU$40.395. The rally follows an upgraded outlook from UBS, which shifted its rating to "neutral" from "sell" and raised its price target from AU$37 to AU$40.
UBS noted the company’s unexpected same-store sales growth (SSSg) and a rise in EBITDA margins as key factors likely to positively surprise the market. The brokerage also increased its earnings per share (EPS) estimates for FY25, FY26, and FY27, attributing the revisions to higher Australian sales growth and improved EBITDA performance that surpass both the company’s prospectus and market consensus.
The company’s recent initiatives, including menu innovation, expanded daypart participation, increased delivery options, and longer operating hours, have been identified as critical drivers of growth. UBS highlighted that these strategies not only enhance customer engagement but also broaden revenue streams for the chain.
Guzman y Gomez has also demonstrated strong growth in its physical footprint. During the first half of FY25, the company opened 15 new locations, with projections to reach 31 new stores by the end of the fiscal year. UBS further emphasized the potential for continued net new store growth, which is expected to strengthen the company’s market position in Australia and Asia.
The brokerage anticipates adjusted EBITDA as a percentage of network sales for Australia and Asia to rise from 4.1% in FY23 to 6.9% in FY26, with growth momentum likely extending beyond FY26. This optimistic forecast reflects the brand’s expanding presence and operational efficiency gains.
Since its debut on the ASX in late June 2024, GYG shares have gained approximately 35%, reflecting strong investor confidence. While the stock remains rated “hold” on average, with a median price target of AU$39.57 according to LSEG, its recent performance suggests growing market enthusiasm for the brand’s long-term prospects.
