First Watch Sees Brighter 2025 With Improved Marketing, Lower Egg Costs, Says Analyst

First Watch Restaurant Group Inc's FWRG same-store sales performance is likely to improve in 2025, given signs of headwinds dissipating in 2024 and more effective marketing, according to TD Cowen.

The First Watch Restaurant Group Analyst: Analyst Andrew Charles upgraded the rating from Hold to Buy, while raising the price target from $21 to $22.

The First Watch Restaurant Group Thesis: The company is likely to generate same store sales growth of 2.6%, higher than the current consensus estimates of 2.4%, Charles said in the upgrade note.

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"We are bullish on the changes to the 2025 marketing strategy that feature more effective and targeted marketing via hyper-personalization, as well as an absolute increase in marketing spend," the analyst wrote. The higher marketing spend is justified, as First Watch Restaurant's advertising is merely 0.8% of its 2024 revenue, "amongst the lowest in the full service industry," he added.

While market trends have improved, third-party delivery traffic is positive year-to-date, with the company making efforts to improve the relationship with third-party delivery platforms, Charles further stated.

The significant decline in egg prices could take the company's 2025 adjusted EBITDA slightly above the consensus estimate of $126.3 million, he said.

FWRG Price Action: Shares of First Watch Restaurant Group had risen by 8.3% to $18.04 at the time of publication on Tuesday.

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