Potbelly Stock Down 20% in a Month: Should You Buy the Dip?

Potbelly Corporation PBPB stock has witnessed a sharp decline of 20.3% in the past month compared with the industry and the S&P 500’s decrease of 3.7% and 3.2%, respectively.The recent decline can be primarily attributed to macroeconomic challenges, stiff competition and high operating costs. A softer macroeconomic environment, including cautious consumer spending and inflationary pressures, continues to hurt discretionary dining.The company also faces heightened competition in the fast-casual segment, especially with more players entering the hot sandwich space. Consumer spending pressure has impacted traffic and adverse weather conditions in early 2025 have further hindered sales performance.PBPB Trades 27% Below Its 52-Week HighThe stock closed at $9.78 yesterday, below its 52-week high of $13.48 but far above 52-week low of $6.28. In the past month, PBPB underperformed industry players like Chipotle Mexican Grill, Inc. CMG, Restaurant Brands International Inc. QSR and El Pollo Loco Holdings, Inc. LOCO.PBPB Price Performance Image Source: Zacks Investment ResearchRobust Fundamentals Likely to Drive PBPB StockPotbelly is benefiting from the five-pillar strategy. PBPB's five-pillar strategy focuses on driving same-store sales growth, expanding its footprint through franchising, enhancing digital capabilities, optimizing operations for efficiency and strengthening brand loyalty. By prioritizing menu innovation, leveraging technology for convenience and fostering franchise partnerships, Potbelly aims to boost profitability while scaling its presence across key markets.Strong unit-level economics have fueled growth, with 23 new shops opened in 2024 and 38 more planned for 2025. Potbelly remains committed to accelerating its franchise development while strategically expanding company-operated locations. The company sees a significant opportunity to maximize existing infrastructure in markets where it already generates above-average system returns, allowing for further market penetration. With strong unit-level economics and a solid balance sheet, Potbelly views additional company-owned stores as a valuable investment that can drive EBITDA growth in the coming years. Moreover, by leading the development of new shops using its latest prototype, the company aims to refine cost efficiencies and operational effectiveness, benefiting both corporate stores and franchise partners. Despite plans to open up to 20 company-operated locations annually, Potbelly remains primarily franchise-driven, expecting the majority of its growth to come from expanding the franchise network. The company believes this move will accelerate its path to scaling the brand.Additionally, menu innovation, including new protein options, sauces and beverages, has been well-received, supporting customer engagement and differentiation in a competitive landscape. The company continues to prioritize digital expansion as a key driver of growth, with the Potbelly Perks loyalty program playing a central role in its strategy. In the fourth quarter, digital sales accounted for more than 40% of total shop revenues, reflecting a year-over-year increase. Following the relaunch of its enhanced Perks program in early 2024, the company remains focused on further digital advancements throughout 2025. Investments are being directed toward enhancing consumer-facing digital platforms, aiming to improve user experience and drive customer engagement in an increasingly competitive market. Additionally, Potbelly is strengthening its data and analytics capabilities to better understand customer behavior and optimize marketing strategies. By refining its digital infrastructure, the company seeks to boost top-line growth and reinforce its position in the fast-casual dining segment.ConclusionPotbelly is facing near-term challenges, including macroeconomic pressures, intensified competition and elevated operating costs. Inflationary headwinds and cautious consumer spending continue to weigh on traffic, while adverse weather conditions have further impacted performance. Despite these challenges, the company remains fundamentally strong, driven by its five-pillar strategy, which emphasizes store expansion through franchising, digital growth and menu innovation. Potbelly's commitment to optimizing operations and expanding its footprint with a mix of franchise and company-owned stores underscores the long-term growth potential. However, given the ongoing industry pressures and stock underperformance, investors may find it prudent to hold the stock rather than initiate fresh positions at this time, waiting for stabilization and clearer signs of recovery before considering new entries. PBPB currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.5 Stocks Set to DoubleEach was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2024. While not all picks can be winners, previous recommendations have soared +143.0%, +175.9%, +498.3% and +673.0%.Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.Today, See These 5 Potential Home Runs >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Chipotle Mexican Grill, Inc. (CMG): Free Stock Analysis Report Potbelly Corporation (PBPB): Free Stock Analysis Report El Pollo Loco Holdings, Inc. (LOCO): Free Stock Analysis Report Restaurant Brands International Inc. (QSR): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks