On Thursday, Telsey Advisory Group adjusted its price target for Holley (NYSE:HLLY) shares, a company known for its performance automotive aftermarket parts. The firm has reduced the target to $5.50 from the previous $6.50 but maintains an Outperform rating on the stock.
The adjustment comes as Holley faces a challenging industry climate this year. Despite these headwinds, Telsey anticipates Holley will expand its market share and achieve sales and profit growth in 2025. The firm's optimism is based on several factors, including Holley's product innovation, category expansion, and strategic acquisitions.
Telsey also expects Holley's profits to benefit from operational improvements, streamlined inventory management, and cost reductions. The company has recently completed a reorganization, with a new management team and structure now fully operational.
The new price target of $5.50 is derived from an unchanged enterprise value to EBITDA (EV/EBITDA) multiple of approximately 9 times. This is applied to Telsey's revised EBITDA estimate for Holley in 2025, which now stands at $132 million, down from the earlier forecast of $144 million. This revision reflects the firm's updated expectations in light of the current industry challenges Holley is navigating.
In other recent news, Holley, a prominent player in the performance automotive aftermarket products industry, shared its Q2 2024 earnings results. Despite a 3.3% decrease in net sales, Holley emphasized its operational improvements and commitment to growth, as evidenced by an increase in adjusted gross margins and EBITDA margins. The company also reported a 25% increase in new product revenue in the first half of 2024, showcasing its resilience amidst market challenges.
Holley's recent developments include the launch of new platforms and products, generating over 1.7 billion media impressions through various events and PR campaigns. The company's leadership has made strategic appointments to enhance its high-performance team and reaffirmed its commitment to becoming a multi-billion-dollar enterprise.
However, due to an uncertain consumer outlook, Holley has adjusted its full-year guidance, with net sales expected to range between $605 million and $645 million.
The company also anticipates Q3 2024 net sales between $133 million to $153 million and adjusted EBITDA between $20 million and $30 million. Despite the revised guidance, Holley remains optimistic about its long-term prospects in the enthusiast-based industry.
InvestingPro Insights
In light of Telsey Advisory Group's recent price target adjustment for Holley (NYSE:HLLY), real-time data and insights from InvestingPro can provide additional context for investors. The company's market capitalization currently stands at $378.3 million, and it is trading near its 52-week low, which may present a buying opportunity for value investors. Holley's P/E ratio is at 20.35, with an adjusted P/E ratio for the last twelve months as of Q2 2024 at a slightly lower 16.59, suggesting a potentially more favorable valuation when considering the company's earnings over the past year.
Despite recent declines in revenue, with a -2.44% change over the last twelve months as of Q2 2024, Holley's gross profit margin remains robust at 37.63%. This indicates that the company retains a strong ability to convert sales into profits. Additionally, analysts predict Holley will be profitable this year, which aligns with the company's positive EBITDA growth of 23.9% over the same period.
InvestingPro Tips highlight that Holley's valuation implies a strong free cash flow yield and that its liquid assets exceed short-term obligations, providing financial stability. Moreover, while the stock has seen a significant price drop over the past year, with a one-year total return of -50.46%, this could signal a potential turnaround point for investors, especially with the company's profitability over the last twelve months and the anticipation of profit growth.
For those considering investing in Holley, there are 10 additional InvestingPro Tips available, which offer deeper insights into the company's financial health and future prospects. These tips can be accessed through InvestingPro's platform at https://www.investing.com/pro/HLLY.
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