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Wingstop stock falls after Piper Sandler downgrades shares

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Yahoo Finance's Julie Hyman and Brian Sozzi discuss why Wingstop stock is down today.

Video Transcript

JULIE HYMAN: We got to talk about one other mover, and that is Wingstop. From running to fried food, as our producer put it. So, we've got a downgrade for the stock. It's actually been downgraded to underweight from-- from overweight, I believe. It's two-lever--

BRIAN SOZZI: Double downgrade.

JULIE HYMAN: --level. Double downgrade. Thank you very much, Soz, for rescuing me there.

BRIAN SOZZI: You're welcome.

JULIE HYMAN: And they just had an executive change at the top, but the analyst, who is Nicole Miller Regan, who's closely watched within the restaurant space, says this cut is a function of the lower royalty rate, revised advertising-expense ratio, higher interest expense, and higher tax rate. Now, you've covered this company closer than I. What do you make of this downgrade today?

BRIAN SOZZI: It was tough to see Charlie Morrison leave early in the week. He's retiring, joining a salad company. We talked that-- we talked about that. Usually, when you see an executive of that caliber, he's leaving-- they are leaving for a reason. I've seen this movie in the past. Chances are you're likely to see slowing sales growth at Wingstop this year because they had such strong sales over the past two years of the pandemic. Here's a company also battling wing price inflation, labor inflation.

So, to me, while a double downgrade is a rarity on the street, you do not see that often. It is, in fact, very aggressive. That's why you're seeing the stock get hit here in the early going. I understand where Piper Sandler is coming from.

JULIE HYMAN: Yeah. Well, we're seeing the stock get hit a little bit in the premarket as a result of this. So, we're going to keep on watching to see how this company does under new management, for sure.