On Friday, Telsey Advisory Group maintained its stock rating at market perform and a $6.00 price target for Leslie's (NASDAQ:LESL), a company specializing in pool supplies and services.
The firm anticipates Leslie's to report subdued results for the second quarter of fiscal year 2024, marked by a mid-single-digit negative comparable sales (comp) and a significant increase in adjusted EBITDA losses compared to the previous year.
These expectations are attributed to a challenging macroeconomic environment that particularly affects discretionary spending and a noted decrease in demand for pool chemicals. Additionally, profitability is expected to be impacted by the increased costs that come with lower sales leverage.
Telsey's outlook reflects a broader trend of business normalization following the surge in home-related product and activity spending during the pandemic. While strategic initiatives like customer loyalty programs, professional services, and AccuBlue water testing are expected to provide some positive impact, these measures are seen as only partially offsetting the pressures on the company's financial performance at the start of 2024.
The report further suggests that while improvements are expected in the second half of fiscal year 2024, uncertainties remain for the upcoming pool season. The ongoing weakness in discretionary spending categories and the deflation in chemical prices continue to pose challenges to Leslie's business prospects.
Telsey concludes that until there is a clear sign of improvement in Leslie's operations, it is prudent to adopt a cautious stance. The $6.00 price target is derived by applying an enterprise value to adjusted EBITDA multiple of approximately 10 times to the firm's fiscal year 2024 adjusted EBITDA estimate of $179 million.
InvestingPro Insights
Recent performance metrics from InvestingPro provide a nuanced picture of Leslie's (NASDAQ:LESL) current market position. The company has experienced a significant return over the last week, with a 9.27% increase in price total return. This short-term uptick contrasts with a broader downward trend, as the stock has seen a substantial year-to-date price decline of -36.9%. Despite these mixed signals, analysts predict Leslie's will be profitable this year, a sentiment supported by the company's profitability over the last twelve months.
InvestingPro Tips highlight that Leslie's is trading at a high earnings multiple with a P/E ratio of 44.44, which adjusts to 30.09 when considering the last twelve months as of Q1 2024. This suggests a premium valuation in the market, which may reflect investor confidence in the company's future earnings potential. Additionally, Leslie's has liquid assets that exceed its short-term obligations, indicating a solid financial footing that may reassure investors concerned about the company's ability to navigate the challenging macroeconomic environment mentioned by Telsey Advisory Group.
For readers looking to delve deeper into Leslie's financial health and stock performance, additional InvestingPro Tips are available at https://www.investing.com/pro/LESL. To access these insights and more, take advantage of our special offer using the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription. There are currently 9 additional tips listed on InvestingPro that can provide further guidance to investors monitoring Leslie's trajectory.
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