On Friday, Loop Capital adjusted its outlook on shares of Leslie's (NASDAQ:LESL), a pool supplies company, reducing the price target to $3 from the previous $6 while keeping a Hold rating on the stock. The revision followed Leslie's pre-announcement of third-quarter results, attributing the disappointing performance primarily to adverse weather conditions and a continued decline in big-ticket repair and remodel (R&R) sales.
The company's pre-announcement revealed a more significant downturn than expected for both the quarter and the full-year guidance. Leslie's also indicated that the fourth quarter might continue to see soft sales, unaffected by weather patterns, and suggested that gross margin recovery might be limited despite comparisons with the previous year when the company was reducing inventory levels. These factors have led to a downward adjustment in the stock's price target.
The firm noted that the pull forward effects of the pandemic had created an abnormal situation, and with underlying fundamentals still appearing soft, the path to normal growth remains unclear. Moreover, Leslie's leverage ratio is considered unusually high, contributing to the decision to lower the price target.
Loop Capital's revised price target reflects a cautious stance on Leslie's financial outlook. The firm anticipates that the company's shares may experience significant volatility until there is greater clarity on its potential for recovery and growth.
In other recent news, Leslie's Inc. has witnessed a series of significant developments. The company's third-quarter performance fell short, leading Piper Sandler to cut its price target for Leslie's stock to $3.00.
Similarly, Baird and Telsey Advisory Group lowered their price targets to $4.00, citing operational leverage issues and a dampened sales outlook, respectively. Stifel downgraded Leslie's stock from "Hold" to "Sell" due to a sharp cut in its FY24 EBITDA forecast.
These adjustments follow Leslie's announcement of a substantial shortfall in its third-quarter performance and a significant reduction in its full-year guidance. The company has been grappling with challenges from various directions, leading to year-over-year declines in all its categories for the third quarter. Despite some improvement in June, they expect the weakness to continue into the fourth quarter.
In addition to these financial developments, Leslie's announced the appointment of Maile (Clark) Naylor to its Board of Directors, following the resignation of Eric Kufel. Naylor's extensive experience and background as an analyst and investor are expected to bring valuable insights to the company.
Furthermore, Leslie's is implementing strategic initiatives to bolster future growth and reduce debt, including plans to open 15 new stores and convert 6 residential stores to PRO format in fiscal 2024.
InvestingPro Insights
As Leslie's (NASDAQ:LESL) grapples with a challenging period, real-time data from InvestingPro provides a more granular look into the company's financial health and market sentiment. The company's market capitalization stands at a modest $522.82 million, with a high earnings multiple of 34.88, suggesting that investors are paying a premium for its earnings relative to the overall market.
This is particularly noteworthy as Leslie's has seen a notable decline in its stock price over recent months, with a 6-month total return plummeting by 58.14%. Despite the downturn, Leslie's maintains a solid gross profit margin of 36.74% over the last twelve months as of Q1 2023, highlighting its ability to retain a significant percentage of revenue after accounting for the cost of goods sold.
InvestingPro Tips suggest caution, as 8 analysts have revised their earnings expectations downwards for the upcoming period, and the stock has experienced significant price volatility. However, it's important to note that Leslie's liquid assets exceed its short-term obligations, indicating a level of financial stability in the face of immediate liabilities.
Moreover, analysts predict the company will be profitable this year, a sentiment echoed by its positive profitability over the last twelve months. For investors seeking a more comprehensive analysis, InvestingPro offers additional tips on Leslie's financial outlook. Use the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription, and gain access to these valuable insights.
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