UPDATE: Goldman Sachs Starts Buffalo Wild Wings, Inc. (BWLD) at Buy

Goldman Sachs initiated coverage on Buffalo Wild Wings, Inc. (NASDAQ: BWLD) with a Buy rating and a price target of $195. Analyst Karen Holthouse thinks the stock is inexpensive relative to long-term opportunity, and sees a good entry point based on analysis of of wing prices and comp trends.

"We believe BWLD is undervalued versus a 1,700 unit TAM in the US (with additional optionality around smaller footprint units, international and emerging concepts), and favorable wing price risk/reward, manageable comp expectations in 2Q, and the potential for a lunch and technology driven comp acceleration into 2016 provide an attractive entry point to the longer-term story," said Holthouse.

"BWLD expects to near its domestic capacity of 1,700 units within the next 5-7 years, which, even using conservative assumptions and a seven- year time frame suggests 30% upside from current levels. This is before giving BWLD any credit for potential around additional US opportunities with smaller footprint units, international franchising, or its emerging brand concepts. However, wing prices and comp trends can drive above-average share price volatility (+/-13% moves over the past nine quarters), so investors must be opportunistic when choosing an entry point," continued the analyst.

"Prices have been stable since 1Q earnings and BWLD recently entered a straddle contract that insulates it from seeing the highs/lows in the market. Wing prices are currently closer to the highs than the lows, implying it would hit the upper limit of the straddle more quickly than the lower limit," added the analyst.

For an analyst ratings summary and ratings history on Buffalo Wild Wings, Inc. click here. For more ratings news on Buffalo Wild Wings, Inc. click here.

Shares of Buffalo Wild Wings, Inc. closed at $156.69 yesterday.

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