On Wednesday, DA Davidson adjusted its outlook on A-Mark Precious Metals (NASDAQ:AMRK), reducing the share price target to $42 from the previous $44, while still recommending a Buy for the stock.
The firm noted that key indicators of the company's profitability showed weakness in the earlier part of the quarter but have begun to show signs of improvement as the quarter progressed.
The firm observed that A-Mark Precious Metals experienced softer profitability in January and February, continuing a trend from the end of the previous quarter. However, an uptick was noted starting in mid-March and carrying into April.
This aligns with the company's recent press release, which reported a challenging start to the third quarter of the fiscal year 2024, but with signs of recovery towards the end of the quarter and into the fourth.
A-Mark Precious Metals, according to DA Davidson, saw a compression in premium spreads on its key products during the third quarter, which ended in March. Nevertheless, these spreads are now widening, indicating a potential for increased profitability.
The pressure faced in the third quarter was greater than anticipated, resulting in earnings that fell short of estimates and a downward revision of the full-year forecast for the fiscal year 2024.
Despite the reduction in the price target, DA Davidson remains optimistic about A-Mark Precious Metals' prospects, expecting a rebound in the current quarter.
The new price target of $42 is based on an 8.5x multiple applied to the firm's calendar year 2025 earnings per share estimate. The Buy rating is retained, reflecting the firm's confidence in the company's ability to recover from the recent softness in profitability.
InvestingPro Insights
Recent data from InvestingPro paints a multifaceted picture of A-Mark Precious Metals (NASDAQ:AMRK). The company's market capitalization stands at a robust $921.95 million, with a price-to-earnings (P/E) ratio of 8.65, indicating a potentially undervalued stock compared to industry standards. This view is further supported by the adjusted P/E ratio for the last twelve months as of Q2 2024, which is slightly lower at 8.31. Additionally, A-Mark's revenue growth of 24.24% over the same period showcases a strong ability to increase sales.
InvestingPro Tips highlight that A-Mark has had a strong return over the last three months, with a 53.91% price total return, echoing the recovery noted by DA Davidson. Moreover, the company's liquid assets surpass short-term obligations, suggesting a stable financial position for near-term operations. While A-Mark's gross profit margins appear weak at 2.5%, the firm's profitability over the last twelve months and analysts' predictions that it will remain profitable this year provide a counterbalance to concerns. For readers interested in deeper analysis and additional insights, there are more InvestingPro Tips available at: https://www.investing.com/pro/AMRK. Remember to use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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