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Noodles' shares tumble after stellar IPO debut

NEW YORK (AP) -- Shares of Noodles & Co. tumbled Monday after a key analyst initiated a "neutral" rating on its stock, saying that its shares are overvalued only 11 days ago after their market debut.

THE SPARK: In a note published Monday, Nick Setyan, an analyst at Wedbush Securities, says that the price of Noodle's stock is too expensive compared with its restaurant peers even as the sales trends are similar.

THE BACKGROUND: Noodles & Co., based in Broomfield, Colo., owns and operates over 300 casual restaurants across 25 states and Washington, D.C. The company was the best performing IPO since April 2012, with a first-day gain of 104 percent to $36.75 per share on June 28. The shares rose as high as $51.97 on July 2, and finished at $44.32 last Friday.

Noodles launched in 1995. It says its revenues have grown to $300 million in 2012 from $170 million in 2008.

But Setyan says that revenue at its restaurants opened at least a year are slowing. He expects the measure to be up 3.3 percent in 2013 and 3.0 percent in 2014, largely in line with its peers like Buffalo Wild Wings and Chipotle. That represents a deceleration from the pace of 5.2 percent and 4.2 percent recorded in 2012 and 2011 respectively.

SHARE ACTION: Its shares dropped $3.66, or 8.3 percent, to $40.66 in midday trading Monday after falling as low as $40.60 earlier in the session.