Portillo’s, Inc. (NASDAQ:PTLO) shares dropped more than 4% intra-day today after Stephens analysts downgraded the company from Overweight to Equal Weight, noting the stock’s recent outperformance within the Limited Service Restaurant sector, partly due to small-cap rotation and an activist investor taking around 10% stake in the company.
The downgrade follows an updated 2024 guidance of flat to low-single-digit (LSD) growth, below Portillo’s long-term growth target, reflecting “choppiness” from challenging macroeconomic conditions.
Although the addition of kiosks across all locations by year-end may support modest ticket increases, the analysts cautioned that consensus estimates for Q3 comps at +1% might be at risk if foot traffic doesn’t accelerate, as their data suggests traffic has been relatively flat. This scenario could place pressure on the stock, given the gains it achieved in Q3.