FAT Brands Stock Up 19.6% in 2024 & Could Still Double
February 7, 2024
Why Investors Should Take a Look at FAT Stock
The U.S. restaurant industry was decimated during the COVID-19 pandemic, with many saying the sector would never recover. They were wrong. Every segment of the industry, from fast food to fine dining, has been thriving lately, well beyond pre-pandemic levels.
With inflation coming down, interest rate cuts on the horizon, and an economic soft landing in the cards, the outlook for restaurant stocks like FAT Brands Inc (NASDAQ:FAT) is robust.
I’ve been keeping an eye on FAT Brands stock for a while now, last writing about it in November 2023. Some recent developments have made FAT stock even more compelling.
FAT Brands (the “FAT” stands for fresh, authentic, and tasty) is a global franchising firm that owns 18 restaurant brands, including “Fatburger,” “Hurricane Grill & Wings,” “Ponderosa,” “Twin Peaks,” and “Smokey Bones.” It has more than 2,300 franchise locations worldwide. (Source: “Fat Brands Inc. Reports Third Quarter 2023 Financial Results,” FAT Brands Inc, October 26, 2023.)
While most restaurants were running for cover during the pandemic, FAT Brands was expanding its empire—and it has continued to do so.
In September 2020, the company completed its $25.0-million acquisition of Johnny Rockets, an international restaurant franchising company that had about 325 locations in more than 25 countries at the time. (Source: “FAT Brands Completes Acquisition of Johnny Rockets, Increases Securitization Facility to $80 Million,” FAT Brands Inc, September 22, 2020.)
In July 2021, Fat Brands bought Global Franchise Group, LLC for $442.5 million. Global Franchise was the name behind chains such as “Great American Cookies,” “Hot Dog on a Stick,” “Marble Slab Creamery,” “Pretzelmaker,” and “Round Table Pizza.” (Source: “FAT Brands Completes Acquisition of Global Franchise Group,” FAT Brands Inc, July 22, 2021.)
In September 2023, FAT Brands announced that it had acquired Smokey Bones Bar & Fire Grill for $30.0 million. This was FAT Brands’ first entry into the barbecue category. (Source: “FAT Brands Announces Acquisition of Smokey Bones Barbecue Chain,” FAT Brands Inc, September 25, 2023.)
FAT Brands Inc Entered 2024 With Excellent Momentum
Following a record-setting performance in 2022, FAT Brands had another year of milestones and significant organic growth in 2023.
Last year, the company opened 125 new restaurants and added more than 200 restaurants to its 1,200-location development pipeline. FAT Brands expects to open 150 new restaurants in 2024. (Source: “FAT Brands Sends Off 2023 With Another Year of Strong Organic Growth,” FAT Brands Inc, January 23, 2024.)
In 2023, the company opened the 400th location of Great American Cookies and the 100th location of FAT Brands’ fastest-growing brand, Twin Peaks.
FAT Brands Inc also brought its brands to new markets around the world in 2023:
- “Fazoli’s” returned to Phoenix, Arizona and Orlando, Florida
- Round Table Pizza debuted in Houston, Texas
- Johnny Rockets got its first location in Iraq
- Twin Peaks got its first locations in Jacksonville, Florida; Columbus, Ohio; and Chattanooga, Tennessee
- Fatburger returned to Tampa, Florida and Chicago, Ohio
- Great American Cookies debuted in Alaska, Arizona, and Illinois
Several of FAT Brands Inc’s newest restaurants opened in spaces that have been non-traditional for the company, including airports, hospitals, and theme parks. Non-traditional spaces continue to be a strategic avenue for FAT Brands’ pipeline.
Commenting on the company’s business growth in 2023, Taylor Wiederhorn, FAT Brands Inc’s chief development officer, said, “Coming off of a record 2022, we were proud to continue to build upon our organic development pipeline of restaurants that have been purchased by franchisees to be opened at a future date, which add to our already robust development pipeline.” (Source: Ibid.)
Wiederhorn noted that new development deals will bring many of its brands to new territories, including Fazoli’s, Great American Cookies, and Marble Slab Creamery to Puerto Rico and Hot Dog on a Stick, Great American Cookies, and Marble Slab Creamery to Iraq.
FAT Brands Inc will also be bringing more restaurants to its existing strongholds like Texas, Canada, Mexico, and the Middle East, including Fatburger, Johnny Rockets, Round Table Pizza, and Pretzelmaker—as well as co-branded locations such as “Fatburger and Buffalo’s Express,” “Fatburger and Round Table Pizza,” and “Great American Cookies and Marble Slab Creamery.”
Management Reported Another Fabulous Quarter
For its fiscal third quarter (ended September 24, 2023), FAT Brands announced that its total revenues increased by six percent year-over-year to $109.4 million. Its royalty revenues increased by 4.8% year-over-year to $23.9 million. Meanwhile, its systemwide sales went up by 0.8% year-over-year. (Source: FAT Brands Inc, October 26, 2023, op. cit.)
The company reported a third-quarter net loss of $24.7 million, or $1.59 per share, compared to a net loss of $23.4 million, or $1.52 per share, in the same period of 2022. Its adjusted net loss in the third quarter of fiscal 2023 was $17.1 million, or $1.14 per share, compared to an adjusted net loss of $16.3 million, or $1.08 per share, in the same quarter of fiscal 2022.
During the third quarter of fiscal 2023, FAT Brands Inc opened 30 new restaurants.
In the first nine months of fiscal 2023, the company’s total revenues advanced 6.1% year-over-year to $321.8 million, its royalty revenues climbed by 5.8% to $69.2 million, and its systemwide same-store sales inched up by 1.3%.
Also in the first nine months of the fiscal year, the company opened 96 restaurants.
We’ll have to wait a bit to see how FAT Brands did in the 2023 fourth quarter and full year, but the big increase in the number of its restaurants suggests it will report terrific financial results.
FAT Brands Inc Declared Q1 Dividend of $0.14 Per Share
Some restaurant stocks are stagnant, but FAT Brands has been rewarding investors with high-yield dividends and racking up significant share-price gains.
In September 2022, the company increased its quarterly payout from $0.13 to $0.14 per share. Since then, it has maintained its payout at that level. (Source: “Dividend History,” FAT Brands Inc, last accessed January 25, 2024.)
This works out to a yield of 7.89% (as of this writing). That’s more than double the current U.S. inflation rate.
In terms of share price, FAT Brands stock has been performing well lately. In 2023, it rallied by 32.64%. Moreover, since the middle of December 2023, FAT stock has soared by 22.95% (as of this writing).
What happened in mid-December?
On December 12, FAT Brands Inc announced that Fazoli’s made its “grand return” to Mesa, Arizona. That kind of news could be enough to juice a share-price rally, but there was also another piece of news around that time.
On December 13, the Federal Reserve announced that it was holding its key lending rate and that it was willing to cut interest rates in 2024, even if the U.S. economy doesn’t enter a recession. There could be three rate cuts in 2024, four in 2025, and three in 2026. (Source: “Full Recap: Here Are Fed Chair Powell’s Market-Moving Comments as Stocks Rally on New Rate Outlook,” CNBC, December 13, 2023.)
As of this writing, FAT Brands stock is also up by 25% over the last three months, 19.6% in the opening weeks of 2024, and 11.6% over the last 12 months.
Despite those big gains, even larger gains could be on the horizon. Analysts’ median 12-month share-price target for FAT stock is $15.00, which points to potential gains of approximately 107%.
Chart courtesy of StockCharts.com
The Lowdown on FAT Brands Stock
FAT Brands Inc is a great restaurant company that has been increasing the number of brands it owns and the number of its locations. With more than 2,300 restaurants worldwide, the company opened more than 200 locations in 2023 and expects to open an additional 150 in 2024.
The additions to FAT Brands Inc’s restaurant portfolio have been helping the company report high revenue growth. Even after its raft of recent acquisitions, the company believes there are significant opportunities for growth on the horizon.
All this should help propel FAT stock’s price higher and allow the company to raise its high-yield dividends again.
