Craig-Hallum bullish on El Pollo Loco, initiates with a Buy

As previously reported, Craig-Hallum analyst Jeremy Hamblin initiated coverage of El Pollo Loco (LOCO) with a Buy rating and $18 price target The firm notes that the new management team with extensive QSR experience is revitalizing the brand and drove record AUVs along with about 200 bps of margin expansion in FY24. El Pollo Loco is uniquely positioned within the fast-growing chicken category with menu innovation in 2025 as a key driver of growth, Craig-Hallum adds. The firm sees further rest-level margin expansion to 18% based on food cost and labor initiatives and the lapping of the FAST Act in California will limit future wage pressure. Lastly, Craig-Hallum cites the underpenetrated digital channel as a key opportunity to drive sales and margin.