On Thursday, DA Davidson adjusted its price target on Wag! Group Co. (NASDAQ:PET) shares, reducing it to $3.50 from the previous $6.00, while continuing to recommend a Buy.
The firm anticipates a significant growth acceleration in the second half of 2024, sparked by the scaling of recent product launches and the introduction of new services such as Furscription and WeCompare. This outlook is also supported by the expectation that Wag! Group will refocus on growth after the pre-payment penalty on its outstanding debt expires in August.
The firm projects Wag! Group's 2024 revenue to reach $109.3 million, which would mark a 30.3% year-over-year increase. This growth is expected to come from the company's strategic initiatives and product rollouts that are anticipated to gain traction in the latter part of the year.
DA Davidson is also estimating an adjusted EBITDA of $5.0 million for the company in 2024, which would represent a margin of 4.6%, a significant improvement from the 0.8% margin in calendar year 2023.
The revised price target of $3.50 represents a multiple of 1.4 times the firm's 2024 enterprise value to sales forecast for Wag! Group. DA Davidson cites broad market multiple compression and limited visibility in the competitive marketing environment for pet services as the primary reasons for the downward adjustment in the price target.
Despite the lowered price target, the firm's maintenance of a Buy rating indicates a continued positive outlook on Wag! Group's stock performance. The analyst's expectations are based on the company's potential to capitalize on its new service offerings and to leverage the end of its debt pre-payment penalty to fuel its growth initiatives.
InvestingPro Insights
As Wag! Group Co. (NASDAQ:PET) navigates through a crucial year of anticipated growth and product launches, real-time data from InvestingPro provides additional context to the company's financial health and market performance. With a current Market Cap of $83.11M, Wag! Group is operating with a moderate level of debt and has shown an impressive Gross Profit Margin of 76.79% over the last twelve months as of Q1 2024. Despite the challenges, analysts still expect sales to grow in the current year, a testament to the company's resilience and strategic initiatives.
InvestingPro Tips highlight that while the stock has taken a significant hit over the last week, with a -15.4% 1 Week Price Total Return, the company's initiatives such as Furscription and WeCompare could be catalysts for future recovery and growth. However, it is important to note that analysts do not anticipate Wag! Group will be profitable this year, and the company has not been profitable over the last twelve months. Additionally, the company does not pay a dividend to shareholders, which may be a consideration for income-focused investors.
For those looking to delve deeper into Wag! Group's financials and future prospects, InvestingPro provides a comprehensive array of metrics and additional tips. Using the coupon code PRONEWS24, readers can get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, unlocking access to valuable insights that could inform investment decisions. Currently, there are 6 more InvestingPro Tips available for Wag! Group, offering a fuller picture of the company's potential trajectory.
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