On Tuesday, Lake Street Capital Markets adjusted the price target for CPI Card Group (NASDAQ:PMTS (TSX:PMTS)) shares, a leader in financial card production and related services, to $22.00 from the previous $24.00, while reaffirming a Buy rating on the stock. This change reflects the firm's reaction to recent performance and market conditions.
CPI Card Group faced a challenging year in 2023, with revenue growth taking a hit due to factors such as the regional banking crisis, conservative spending by customers, and inventory rebalancing.
Despite these headwinds, which are expected to continue into the first half of 2024, Lake Street Capital Markets is optimistic about the company's outlook for the year, anticipating a return to growth.
The firm remains confident in CPI Card Group's long-term potential, highlighting opportunities in the contactless and eco-friendly card segments, as well as expansion into adjacent markets such as Health Savings Accounts (HSAs) and Flexible Spending Accounts (FSAs). The expectation is for CPI to resume mid-single-digit growth by 2025, which should reveal the company's true earnings potential.
The appointment of John Lowe as CEO in January 2024 is viewed as a strategic move that aligns with Lake Street's positive outlook. Lowe's (NYSE:LOW) extensive experience and familiarity with CPI Card Group are seen as beneficial, eliminating concerns about potential disruptions from an external leadership change.
With CPI Card Group's stock trading at 7 times the firm's estimated 2024 GAAP earnings per share (EPS) and management's intention to continue its $20 million stock buyback program, Lake Street believes there is a robust support level for the stock price in the near term.
The firm anticipates that as investors gain clarity on the company's recovery in the second half of 2024, the stock will start to appreciate, reflecting the significant EPS potential that is expected to become more apparent.
InvestingPro Insights
InvestingPro data underscores the current valuation and performance metrics for CPI Card Group (NASDAQ:PMTS). With a market capitalization of $200.5 million and a P/E ratio that has adjusted to 8.45 for the last twelve months as of Q4 2023, the company's financial position is clear to potential investors. Additionally, the stock has experienced a large price uptick of 27.7% over the last six months, indicating a rebound from a year-long decline where the price total return was -54.32%. This aligns with the optimism from Lake Street Capital Markets regarding the company's potential recovery and growth.
Two InvestingPro Tips that stand out for CPI Card Group are its high shareholder yield and the prediction by analysts that the company will be profitable this year. These factors may offer investors a sense of confidence in the company's ability to generate returns and manage its financial health effectively. InvestingPro offers further insights with additional tips for investors looking to delve deeper into CPI Card Group's financials and market position. To access these valuable insights, consider using the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription at https://www.investing.com/pro/PMTS.
InvestingPro also notes that CPI Card Group's liquid assets exceed its short-term obligations, which could be an indicator of financial stability amidst the challenging market conditions described. For those interested in a more comprehensive analysis, there are 6 additional InvestingPro Tips available that could further inform investment decisions regarding CPI Card Group.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.