Why Noodles (NDLS) Shares Are Getting Obliterated Today

Radek Strnad /
2024/03/08 3:53 pm EST

What Happened:

Shares of casual restaurant chain Noodles & Company (NASDAQ:NDLS) fell 14.4% in the morning session after the company reported fourth-quarter results with revenue and EPS falling short of Wall Street's estimates thanks to worse-than-expected same-store sales performance (4.2% system-wide declines compared to estimates of 3.9%). Furthermore, its full-year revenue guidance fell short as the company expects to build fewer new restaurants than Wall Street had forecasted. Overall, this was a bad quarter for Noodles.

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What is the market telling us:

Noodles's shares are a little volatile and over the last year have had 37 moves greater than 5%. But moves this big are very rare even for Noodles and that is indicating to us that this news had a significant impact on the market's perception of the business. 

The biggest move we wrote about over the last year was 4 months ago, when the stock gained 8.6% on the news that the company reported third-quarter results, which beat Wall Street's expectations for same-store sales, revenue, and EPS. Full year guidance was tweaked, but there were no significant changes. For example, full year revenue guidance was reduced by just $1mm at the midpoint (on ~$500 million of total revenue), same store sales were maintained, and margins were raised slightly. Overall, this quarter's results seemed fairly positive, and shareholders should feel optimistic.

Noodles is down 28.1% since the beginning of the year, and at $2.24 per share it is trading 62.4% below its 52-week high of $5.95 from March 2023. Investors who bought $1,000 worth of Noodles's shares 5 years ago would now be looking at an investment worth $309.99.

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