The Guzman Y Gomez Ltd (ASX: GYG) share price has seen plenty of volatility in its early listed life. It's up 21% from the initial public offering (IPO) price but down 11% from the first-day-of-trading price of $30, as shown on the chart below.
With such a volatile stock, it's hard to say where the valuation is going to go next.
Some experts think the GYG share price is going to sink while others see a long-term opportunity. One of Australia's leading broker has just put a very optimistic price target on the Mexican food business.
Bullish price target on the Guzman y Gomez share price
According to reporting by The Australian, the broker Barrenjoey has initiated its coverage on GYG shares with a price target of $33.
A price target is where the broker thinks the share price is going to go over the next 12 months. Of course, these price targets are just guesses – no one actually knows where share prices are going in a year.
If the Guzman y Gomez share price increased to $33, it'd represent an increase of approximately 24% over the next 12 months.
Of course, Barrenjoey has a close connection with GYG. Barrenjoey acted as a joint lead manager, bookrunner, and underwriter during the IPO process. The broker also owns around 10% of Guzman y Gomez, so it would benefit substantially if the GYG share price rose to $33.
However, as I mentioned, not every expert is positive on the company.
Sell call on GYG stock
Writing on The Bull, Jabin Hallihan from Auburn Capital called the Mexican food ASX share a sell.
He noted that the business has done well for IPO investors, but Hallihan suggested "investors may want to consider trimming their positions to pocket some profits".
The Auburn Capital investment team likes the business but suggests that the reporting season of August 2024 "will more than likely highlight a challenging year ahead for restaurants and discretionary retailers."
In the Guzman y Gomez prospectus, it disclosed it's expecting to report FY24 revenue of $339.7 million (up 31%), $25 million of earnings before interest, tax, depreciation and amortisation (EBITDA) and a net loss after tax of $16.2 million.
In FY25, the company projects revenue of $428.2 million (up 26%), EBITDA of $59.9 million (up 136%), and a net profit of $6 million (up $22.2 million).
