What Happened?
Shares of casual sandwich chain Potbelly (NASDAQ: PBPB) jumped 22.6% in the afternoon session after the company reported strong first quarter 2025 results which significantly beat analysts' EPS and EBITDA and sales estimates. System-wide sales grew nearly 5%, powered by an increase in shop openings and solid performance from both company-owned and franchise locations. Franchise development was a particular strength in the quarter. Potbelly opened four new shops and secured commitments for 40 more, laying a solid foundation for scalable, recurring growth. Zooming out, we think this quarter featured some important positives.
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What The Market Is Telling Us
Potbelly’s shares are quite volatile and have had 17 moves greater than 5% over the last year. But moves this big are rare even for Potbelly and indicate this news significantly impacted 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 14.8% on the news that the company reported strong preliminary Q4 2024 guidance. Same-store sales are now projected to grow slightly by 0.2% to 0.3%, a sharp turnaround from the earlier forecasted decline of 2.5% to 0.5%. Adjusted EBITDA is expected to reach between $8.0 million and $8.4 million, up from the previous estimate of $7.0 million to $8.0 million.
Management expressed positive sentiment about the improvements in both sales and profits and plans to add 38 new shop sites in 2025 to better meet rising market demand. Overall, the results underscore management's improved execution capabilities.
Potbelly is up 10.1% since the beginning of the year, but at $10.32 per share, it is still trading 22.4% below its 52-week high of $13.30 from February 2025. Investors who bought $1,000 worth of Potbelly’s shares 5 years ago would now be looking at an investment worth $3,452.
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