First Watch (FWRG.O): Setting The Table For 2Q26: Little Credit For Base Business

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First Watch (FWRG.O): Setting The Table For 2Q26: Little Credit For Base Business

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16 Jul 2026 18:16:07 ET │ 15 pages

First Watch (FWRG.O)

Setting The Table For 2Q26: Little Credit For Base Business

CITI'S TAKE

Shares trading at <6.5x CY27E EBITDA suggest little expectation of good

news heading into C2QEPS, and we tend to agree in the near-term – SSS

likely stay positive but miss the Street. That said, we do not believe investors Buy

are appropriately valuing the base business (e.g., highly profitable existing Price (16 Jul 26 16:00) US$12.18

store base), financial optionality (e.g., slowing unit growth to flex FCF), or

Target price US$21.00strategic optionality (e.g. how it could fit into a portfolio of other concepts),

particularly when juxtaposed vs. other, low/no-growth CDRs (trading ~8x Expected share price return 72.4%

CY27E Street EBITDA on average). We think this valuation disconnect Expected dividend yield 0.0%

means management openness to a shift in unit growth vs. FCF that could

Expected total return 72.4%support multiple expansion over time.

Market Cap US$751M

Topics for the call — 2Q26 EPS due 8/4 BMO, call 8AM ET. (1) Marketing-driven

traffic relative to internal expectations? Where is the biggest opportunity to deploy

incremental marketing dollars? Have consumers shifted toward lower-price point

items/less attach in the wake of higher energy prices? (2) Given the brand’s higher- Price Performance

income skewed customer base and over-exposure to breakfast, how has consumer (RIC: FWRG.O, BB: FWRG US)

usage of GLP-1s showed itself in brand demand? (3) Updated thoughts on the

longer-term cadence of unit growth (vs. the LT algo of LDD%)? Is the brand best-

positioned to compete as a stand-alone enterprise? (4) Upcoming tech investments