Kura Sushi USA Inc. (KRUS) PT Lowered to $85 at Craig-Hallum

Craig-Hallum analyst Jeremy Hamblin lowered the price target on Kura Sushi USA Inc. (NASDAQ: KRUS) to $85.00 (from $120.00) while maintaining a Buy rating.

The analyst commented: "With June’s FQ3 preliminary update and guidance revision, the focus of Kura’s FQ3 report centered on current SSS trends and the key drivers of the comp slow down since March (SSS up 7.3%). FQ4 comps were guided down MSD to HSD, slightly worse than most expected, as the CA market softened significantly beginning in April due to macro factors while the TX market saw some cannibalization with new units opening in February in the Houston and Dallas markets. Management is responding to the slower trends through more disciplined spending which should stabilize margins despite weaker comps. While we are disappointed by the slowing comp trends, we note that KRUS saw SSS turn negative in FY18 before strongly turning in FY19. Kura’s unit growth pipeline remains very strong with 20%+ unit growth likely for at least the next five years. The stock multiple is likely to remain compressed with SSS negative but will return to a top tier multiple at the earliest signs of comp recovery. We remain highly confident in the KRUS story LT and highlight that total sales for FY24 are still on track to exceed 25%, which is in the top tier of all restaurants. We reiterate our Buy rating and lower our Price Target to $85 but view the pullback in shares as an incredible opportunity to invest in an extraordinary company still in the early stages of growth."

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