Kura Sushi Stock Dips Into a Hot Buying Opportunity

Key Points

• Kura Sushi's stock price dip following the Q1 results and guidance update is a buying opportunity, but how low can it go before rebounding? 
• The guidance for FY2025 is cautious, given the 20%+ store count CAGR and growing comps. 
• Analysts are lifting their targets and suggest a move back to 2024's highs is likely. 

Kura Sushi’s NASDAQ: KRUS stock price retreated following the FQ1 2025 release, dipping into a hot buying opportunity for small-cap and restaurant investors. The move is due to the guidance, which fell short and expects growth to slow, but many factors, including the pace of Q1 and store count growth, suggest otherwise. 

The likely scenario is that this company will continue to outperform and deliver a 20% growth pace or better, exceeding the full-year guidance by hundreds of basis points. Add in the fact that this business is as healthy as it gets—well-capitalized, fully equipped to execute its plans, and positioned for success. The odds are strong that the rebound in share prices will not only retest the 2024 highs but could also set new records before the end of 2025.

Kura Sushi Beats on the Top and Bottom Lines; Reaffirms Full-Year 2025 Guidance

Kura Sushi had a solid quarter, with revenue up 25.2% due to a growing store count and increasing comps. Comps came in at 1.8%, reverting to growth after a brief period of contraction, and are expected to remain positive this year. The store count increased by 6 in the quarter and 16 since last year, for a gain of 26%, which is also why the 15% fiscal-year growth forecasted by management seems low. 

The company experienced margin pressure due to growing pains, but much less than restaurant analysts anticipated. Revenue leverage and spending control offset rising wages and inflation to reduce operating losses significantly. The critical details are that the restaurant-level operating margin is positive and running near 18%, while corporate-level operating losses dwindled to $1.5 million, down nearly 50% from the previous year. This keeps the company on track for profits in F2025 and accelerating profit growth in 2026 and 2027. 

The guidance is tepid relative to the analysts’ consensus reported by MarketBeat but unlikely to keep the stock price down long because it is likely cautious. The guidance is cautious because of an expectation for comp store growth and a 20%+ store count growth rate. That rate is expected to stick in 2025, as indicated by management. 

Threat of Dilution Recedes as Kura Sushi Profitability Improves

Kura Sushi diluted its share count in Q1, selling about 800,000 shares to raise $64 million in cash, but the worst is now past. The sales shored up the balance sheet, leaving it in a solid position with sufficient cash to sustain operations for over a decade at the Q1 burn rate. Other highlights include zero long-term debt, a 50% increase in equity, and ultra-low liability. The company’s total liability is less than 0.8x equity and 0.5x assets, leaving it in a solid position capable of executing its long-term growth plans. With only 70 locations in operation, there is a long road of growth ahead. Comparable fast-casual chains such as Chipotle Mexican Grill NYSE: CMG currently operate more than 3,500 locations with plans to double the count. 

The analysts’ response to the Q1 earnings news is good. The first revisions tracked by MarketBeat are three price target increases that maintain the Moderate Buy sentiment rating and highlight the potential stock price rebound. The fresh targets range from $90 to $120, averaging roughly $103, a gain of nearly 15% from critical support targets and 25% at the high end. 

Kura Sushi Pulls Back: The Uptrend Is Still Intact

Kura Sushi’s stock price action is volatile and shows significant resistance at the $100 level. However, the price action is also trending higher, showing higher lows and higher highs aligning with an up-channel. In this environment, the stock will likely increase to a higher high in 2025 than in 2024; the question is how deep the 2025 pullback may be before the rebound begins. Following the guidance update, the market is down more than 10% and may fall further. The critical support target is near $88.50; a move below there would be bearish for this market. In that scenario, KRUS stock could fall to $70 or lower before