On Wednesday, Sally Beauty Holdings (NYSE:SBH) shares had its price target reduced by DA Davidson to $12.00 from the previous $13.00, while the firm maintained a Neutral rating on the company's stock.
The adjustment follows Sally Beauty's reported second-quarter fiscal year 2024 sales and earnings per share (EPS) shortfall, which was announced on Tuesday.
The lower financial results were attributed to increased frugality among customers at Sally Beauty, with a noted rise in promotional take rates by low-income consumers, adversely affecting gross margins.
Despite the weaker performance in the Sally Beauty segment, the company experienced more favorable trends at Beauty Systems Group (BSG), which caters to professional stylists with generally higher-income clientele.
Although Sally Beauty upheld its full-year 2024 sales forecast, it revised its operating margin expectations downward. Consequently, DA Davidson has reduced its FY24 earnings per share estimate for the company by $0.13, a 7% decrease.
The ongoing decline in operating margin, which is anticipated to fall year-over-year for the third consecutive year, has prompted the firm to adjust its price target. The new target is based on a 5 times multiple of the revised calendar year 2025 estimated EBITDA of $439 million, a reduction from the previous estimate of $462 million.
Sally Beauty's financial adjustments and the revised price target reflect the challenges faced in the current economic environment, particularly among its customer base.
InvestingPro Insights
Following the recent price target adjustment for Sally Beauty Holdings (NYSE:SBH), InvestingPro data provides a deeper look into the company's financial health and market performance. With a market capitalization of $1.18 billion and a P/E ratio standing at 7.53, Sally Beauty Holdings appears to be trading at a low earnings multiple. This is underscored by the company's P/E ratio for the last twelve months as of Q2 2024, which is slightly lower at 7.38.
InvestingPro Tips suggest that while analysts have revised their earnings expectations downwards for the upcoming period, they also predict that the company will remain profitable this year, a continuation of its profitability over the last twelve months. Moreover, Sally Beauty's liquid assets are currently sufficient to cover short-term obligations, which may provide some financial stability amidst market challenges. However, it's important to note that the company is trading at a high P/E ratio relative to near-term earnings growth, with a PEG ratio of 2.81 as of the last twelve months ending Q2 2024.
For investors looking to delve further into Sally Beauty's prospects, InvestingPro offers additional insights, including a fair value estimation of $14.44, which is higher than the current price. For those interested in leveraging these insights, InvestingPro has more tips available, and users can use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription. Visit https://www.investing.com/pro/SBH to explore the full range of analysis and tips – there are 7 additional InvestingPro Tips available for Sally Beauty Holdings that could further inform investment decisions.
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