On Monday, Lake Street Capital Markets updated its valuation for Vista Outdoor (NYSE:VSTO) shares, increasing the price target to $40.00 from the previous $37.00, while keeping a Hold rating on the stock.
The adjustment follows the new, higher bid from CSG for Vista Outdoor's Kinetic business, which has proposed an acquisition deal worth $2.1 billion. This offer is set to provide Vista Outdoor shareholders with a $21 per share cash payout and a share of Revelyst.
Revelyst, a part of the deal, is currently valued at a 10 times EV/EBITDA multiple based on this year's estimated earnings before interest, taxes, depreciation, and amortization (EBITDA) of $84.2 million, including corporate expenses. Additionally, the deal includes $250 million in cash.
The updated valuation by Lake Street Capital Markets reflects an approximate 6.5 times multiple on their consolidated EBITDA estimate for Vista Outdoor. This marks an increase from the earlier valuation, which was based on a 6.0 times EBITDA multiple.
The revised price target is a result of the enhanced offer price for the Kinetic business and the increased cash payment proposed to be distributed to shareholders. The proposed transaction's structure is anticipated to deliver significant immediate cash to shareholders while also providing them with a stake in Revelyst.
Vista Outdoor's stock valuation now incorporates the financial dynamics of the proposed transaction, which is likely to influence the company's stock performance moving forward.
The Hold rating indicates that while the analyst sees the updated offer as a positive development for shareholder value, they do not suggest a change in investment stance at this time.
Investors and market watchers will monitor how the proposed acquisition impacts Vista Outdoor's financials and market position, as well as the company's shareholders' response to CSG's new offer.
In other recent news, Vista Outdoor Inc . has been the focus of significant financial developments. The company reported Q4 total sales of $2.75 billion, with adjusted EBITDA margins at 16.1%.
MNC Capital, L.P. has reaffirmed its commitment to its $42 per share all-cash offer to acquire Vista Outdoor, despite Vista Outdoor's ongoing sale to Czechoslovak Group a.s. ("CSG") for its Kinetic Group business, valued at $2.1 billion.
Investment advisor TIG Advisors, which holds about 532,000 shares of Vista Outdoor, has publicly expressed preference for MNC Capital's proposal and criticized the Board's reluctance to accept it.
Meanwhile, analyst firms Roth/MKM and B.Riley maintained a Buy rating on Vista Outdoor's shares, while Lake Street Capital Markets downgraded the company from Buy to Hold.
Additionally, Vista Outdoor's segment, Revelyst, has completed the sale of its wood pellet manufacturing arm, Fiber Energy Products, to Lignetics, Inc., as part of its strategic refocusing efforts. These are recent developments in the operations of Vista Outdoor Inc.
InvestingPro Insights
In light of the recent developments with Vista Outdoor (NYSE:VSTO), InvestingPro data shows a complex financial landscape. The company's market capitalization stands at $2.19 billion, and while the P/E Ratio is negative at -395.47, an adjusted P/E ratio for the last twelve months as of Q4 2024 indicates a more reasonable value at 11.33. This suggests that, despite recent profitability challenges, investors may anticipate better earnings performance in the future.
InvestingPro Tips highlight that Vista Outdoor's net income is expected to grow this year, which aligns with the analyst's revised price target and the potential cash influx from the Kinetic business deal. Additionally, the company's liquid assets exceed its short-term obligations, providing a cushion for operational needs or strategic initiatives. However, it's worth noting that three analysts have revised their earnings downwards for the upcoming period, which could signal caution among investors.
For those looking to delve deeper into Vista Outdoor's financial health and future prospects, InvestingPro offers additional insights. There are more tips available on the platform for those interested, and users can access these by visiting https://www.investing.com/pro/VSTO. Plus, readers can use the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription, providing a valuable resource for informed investment decisions.
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