Build-A-Bear Workshop is set to win as adults get around to the fact that toys aren't just for kids anymore, according to D.A. Davidson. Analyst Michael Baker initiated coverage of the toy retailer earlier this week with a buy rating. His price target of $42 signals a potential upside of 48% from the stock's $28.46 close Wednesday. "BBW is a vertically integrated, omnichannel retailer that has (1) built an iconic brand with transferable equity outside of their core product segment; (2) successfully grown their customer base across age groups; and (3) diversified their store formats to include a diverse mix of locations," the analyst wrote. Shares of Build-A-Bear have outperformed the broader market this year, rising more than 17%, while the S & P 500 is up 13%. Despite this outperformance, Baker said the stock "continues to trade at a significant discount to the market and to our long term growth rate." BBW YTD mountain BBW ytd chart Build-A-Bear also caters to older demographics, with teens and adults responsible for more than 40% of sales in 2022 owing to numerous collectibles and licensing agreements, Baker noted. He added that since its inception in 1997, the company has successfully expanded its brand image to beyond that of a teddy bear mall retail store. To date, about 35% of the company's locations are located outside malls, with Baker modeling a growth rate of 20 to 30 new stores per year. "The Build-A-Bear name and related entertainment properties have become a part of pop-culture in our view, allowing extensions into multiple product areas including home accessories, toys, pet products, and apparel," Baker wrote. "To us, this increases their total addressable market well beyond that $9B [global stuffed and plush toy] market and suggests a market share in the low single digit range." — CNBC's Michael Bloom contributed to this report.