It has been a rough year for Guzman Y Gomez Ltd (ASX: GYG) shares.
Despite a strong rebound on Monday, since this time last year, the quick service restaurant operator's shares have lost almost 30% of their value.
Has this created a buying opportunity for investors? Let's see what Morgans thinks about the burrito seller.
What is the broker saying?
Morgans acknowledges that Guzman Y Gomez slightly underperformed expectations in FY 2025.
In addition, its trading update for the first quarter of FY 2026 was weak according to the broker, as was its margin guidance for the year ahead.
Australian segment underlying EBITDA as a percentage of network sales is expected to expand modestly to 5.9% to 6.3% in FY 2026, compared to 5.7% in FY 2025.
However, while the top end of its guidance range is lower than Morgans was expecting, it suspects that management could have been conservative with it. Commenting on the result, the broker said:
The FY25 result was slightly softer than expected. A weak 1Q26 trading update and lower than expected FY26 EBITDA margin guidance weighed on the shares and results in material near-term consensus revisions. Comp sales growth is expected to accelerate from the trading update through menu innovation, daypart expansion, operational excellence, marketing and digital initiatives. We also think GYG's margin guidance will prove conservative.
Time to buy Guzman Y Gomez shares?
While not overly impressed with the results, the broker remains positive and feels that recent share price weakness has created an attractive buying opportunity for investors. It adds:
Whilst the negative share price reaction to the weaker than expected guidance and trading update was disappointing, we think it's a buying opportunity. GYG upgraded its long-term outlook with its FY30 EBITDA margin target ahead of our forecast and consensus. Net net, our near-term forecast downgrades are offset with longer-term upgrades and our DCF valuation is largely changed. Maintain BUY.
Morgans has retained its buy rating on Guzman Y Gomez shares but has cut its price target on them to $30.60 from $38.00.
Based on its current share price of $25.54, this implies potential upside of approximately 20% for investors over the next 12 months.
In addition, the broker expects Guzman Y Gomez to reward shareholders with a 19 cents per share dividend in FY 2026. Though, at the current share price this represents a yield of less than 1%.
