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Jim Cramer Thinks First Watch Restaurant (FWRG) is ‘Very Weird’ and Recommends Staying Away from Stock

We recently published a list of Jim Cramer October Portfolio: Top 10 Stocks to Buy and Sell. Since First Watch Restaurant Group Inc (NASDAQ:FWRG) ranks 10th on the list, it deserves a deeper look.

Jim Cramer in a latest program commented on the latest stronger-than-expected jobs report, calling it “good news” and expressed surprise at how the stocks “roared” on the report.

“For years, we have been taught that when buying yields go up, stocks go down. Ever since the Fed gave us that double rate cut last month, we have been afraid that they have been acting so decisively. Something might be wrong with the economy—something they knew about, but we didn’t.”

Jim Cramer was also surprised by bank stock gains. He said that these stocks probably rose because a strong employment situation means fewer bad loans. Cramer also said we might be heading to “no landing at all.”

“People have a collective sigh of relief that we weren’t headed for a crash landing. They held onto their stocks with both hands.”

For this article we watched several latest programs of Jim Cramer and picked 10 stocks he’s talking about. With each company we have mentioned its number of hedge fund investors. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).

First Watch Restaurant Group Inc (NASDAQ:FWRG)

Number of Hedge Fund Investors: 8

When asked about First Watch Restaurant Group, Jim Cramer said:

“Right now this restaurant group is very weird…. I’m worried about First Watch Restaurant Group Inc (NASDAQ:FWRG) being a competitive outfit. The multiple is way too high. I’m going to say no to that one.”

When First Watch reported weak Q1 results back in May, the bulls said the company would rebound as traffic declines were temporary. In that quarter the company saw a 4.5% year-over-year decline in same-restaurant traffic. The company noted weak traffic continued into Q2, citing challenging market conditions. Despite this, First Watch Restaurant Group Inc (NASDAQ:FWRG) outperformed the Black Box Casual Dining segment by more than a percentage point, reflecting its strong industry position.

What about Q2 results posted in August?

The company’s profits in the quarter rose by just a penny compared to last year. The initial market reaction to the guidance caused shares to drop in premarket trading; however, they later rebounded impressively, gaining double digits and ending a three-day losing streak.

System-wide sales rose by 10.1%, although same-restaurant sales growth was down 0.3% and same-restaurant traffic declined by 4% year-over-year. Total revenue climbed 19.5% to $258.6 million, surpassing estimates by $950,000. This resulted in an increase in the restaurant-level operating profit margin to 21.9% and an operating income margin of 6.4%. Adjusted EBITDA grew by $9.5 million to reach $35.3 million.

For FY24, First Watch Restaurant Group Inc (NASDAQ:FWRG) updated its projections, expecting same-restaurant sales growth to fall between negative 2.0% and flat, with same-restaurant traffic growth anticipated in the negative mid-single digits. This is a revision from previous guidance, which forecast flat to 2% growth for same-restaurant sales and low single-digit declines for traffic. Total revenue for FY24 is expected to rise by 17% to 19%, with adjusted EBITDA targeted between $106 million and $112 million, both unchanged from prior guidance.

Overall, First Watch Restaurant Group Inc (NASDAQ:FWRG) ranks 10th on Insider Monkey’s list titled Jim Cramer October Portfolio: Top 10 Stocks to Buy and Sell. While we acknowledge the potential of First Watch Restaurant Group Inc (NASDAQ:FWRG), our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than FWRG but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

READ NEXT: Analyst Sees a New $25 Billion “Opportunity” for NVIDIA and Jim Cramer is Recommending These Stocks.

Disclosure: None. This article is originally published at Insider Monkey.

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The #1 Lithium Stock to Watch Going into 2025

A Recent Monumental Shift in the Mining Arena has Shined a Big Spotlight on Lithium!

Many eyes are once again locked on the critical mineral since Rio Tinto, the 2nd largest mining company in the world, acquired Arcadium Lithium PLC. The acquisition immediately catapulted Rio Tinto to becoming the world’s 3rd largest lithium producer.

Why would a big mining giant like Rio Tinto be interested in acquiring a lithium producer?

Because they recognize there is a tremendous need for lithium in the world’s energy transition. Rio Tinto CEO Jakob Stausholm said Rio is confident that long-term demand for lithium will be strong.

This is the largest mining deal in the world since 2007 and marks a significant milestone to the lithium industry as it depicts a massive shift in sentiment from the big mining companies.

As the race to find secure lithium supplies continues, an underfollowed lithium explorer is causing quite the commotion as Wall Street learns about the company’s disruptive lithium land package in Brazil!

Why is Brazil Important?

In less than two years, Brazil emerged from ZERO exports to the fifth-largest lithium exporter in 2023 with projections of a fivefold production increase in the next five years! To say that Brazil is undergoing a lithium boom is an understatement!

Lithium exploration is accelerating in Brazil, in the wake of the relaxing of regulations and growing demand for the mineral that’s crucial to the global transition to electric vehicles. The country has relaxed its lithium export regulations, which has attracted global investment and transformed the country into a major producer of the critical element.

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In August 2024, Australian lithium giant Pilbara Minerals announced its plans to acquire Latin Resources for approximately A$559.9m ($371.12m) to diversify its operations.

Click to continue reading…