On Thursday, Piper Sandler adjusted its outlook on Leslie's (NASDAQ:LESL), a company specializing in residential and commercial pool supplies and services, by slashing its price target to $3.00 from the previous $6.00. The firm kept a Neutral stance on the stock.
The decision came after Leslie's announced a substantial shortfall in its third-quarter performance, marking the second consecutive year of such a miss. Additionally, the company significantly lowered its full-year guidance after the market closed.
Leslie's has been facing challenges from various directions, leading to year-over-year declines in all of its categories for the third quarter. The residential channel, in particular, showed notably weak traffic. Management attributed the third-quarter guide-down mainly to unfavorable weather conditions in April and May.
Despite seeing some improvement in June, they anticipate the weakness to continue into the fourth quarter. The outlook for big-ticket discretionary items does not appear to be getting any better.
The revised price target reflects a continuation of the 13x multiple previously applied by Piper Sandler, albeit with adjusted expectations for the fiscal year 2025. According to the firm's analysis, the combination of the recent pre-announcement and the downbeat forecast for the year's end has necessitated a recalibration of their valuation model for Leslie's.
The update on Leslie's comes at a time when the company is grappling with external pressures and a less-than-optimistic forecast for consumer spending on major discretionary purchases. The pool supply company's stock may face headwinds as investors digest the implications of the lowered guidance and price target adjustment.
In other recent news, Leslie's Inc., a leading pool supplies company, has seen several significant developments. Baird recently adjusted its price target for Leslie's shares to $4, maintaining a Neutral rating due to operational leverage issues and softer sales. Similarly, Telsey Advisory Group also revised its price target for the shares to $4.00, following a weaker-than-expected earnings forecast for the third quarter of fiscal year 2024.
Stifel downgraded Leslie's stock from "Hold" to "Sell" following a significant reduction in its FY24 EBITDA forecast. This downgrade was influenced by a substantial reduction in the company's forecast for FY24 EBITDA and challenges in attracting investor interest.
Despite these financial challenges, Leslie's is implementing strategic initiatives to bolster future growth and reduce debt. These include plans to open 15 new stores and convert 6 residential stores to PRO format in fiscal 2024.
Leslie's also 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.
InvestingPro Insights
In light of Piper Sandler's revised outlook on Leslie's (NASDAQ:LESL), it's pertinent to consider additional metrics and insights from InvestingPro. Leslie's has experienced a significant return over the last week, with a 9.09% increase in price, potentially signaling investor confidence in the face of recent challenges. However, it's important to note that the company is trading at a high earnings multiple, with a P/E ratio of 50.95, which is above the industry average, indicating a premium on the stock. Additionally, Leslie's liquid assets exceed its short-term obligations, which could provide some financial flexibility as the company works through its current headwinds.
InvestingPro Tips suggest that despite the stock taking a big hit over the last six months, with a -41.21% return, analysts predict Leslie's will be profitable this year. This could be a crucial factor for investors considering the long-term potential of the stock. Moreover, with the company not paying a dividend to shareholders, reinvestment in growth and recovery becomes a focal point.
For those looking to delve deeper into Leslie's financial health and future prospects, InvestingPro offers additional insights and tips. By using the coupon code PRONEWS24, readers can get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription, gaining access to a comprehensive analysis of Leslie's, including 6 additional InvestingPro Tips that could further inform investment decisions.
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