UPDATE: Craig-Hallum Upgrades Kura Sushi USA Inc. (KRUS) to Buy After Earnings Beat and Ahead of Easier Comps
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Craig-Hallum analyst Jeremy Hamblin upgraded Kura Sushi USA Inc. (NASDAQ: KRUS) from Hold to Buy adding it to the Alpha Select List and increasing the price target to $25 from $17. The company delivered better than expected Q1 FY21 results with sales upside driven by restaurants in TX that saw SSS down just 32%, despite a nearly 40% reduction in weighted table capacity. He noted 5 reasons for the upgrade:
1) Reported results are expected to improve as the company laps easy compares beginning in March
2) The company clearly has ample liquidity to navigate the near-term with access to another $26M on its revolver and a parent company with a strong capital position and willingness to provide support
3) Kura is committed to 20% unit growth due to weakened competition and potentially greater than 300 units LT
4) Off premises sales capability has improved dramatically during COVID and potentially increases baseline AUVs
5) Kura’s embedded technology provides a significant competitive advantage that should allow the company to be the leading player in the sushi category
The analyst stated "We expect consensus estimates for Q2 FY21 to reset lower to adjust for capacity limitations but we see opportunity for FY22 estimates to track higher during 2021. The sushi category is among the fastest growing in the US and ripe for consolidation following COVID. We believe the incredible efficiency of the Kura model will allow the company to emerge as a winner on the backside of the pandemic and is poised for 10x growth over the next decade".
Shares of Kura Sushi USA Inc. closed at $18.75 yesterday.
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