On Tuesday, Telsey Advisory Group adjusted its price target for ThredUp Inc. (NASDAQ:TDUP), a leading online resale platform, reducing it to $3 from the previous $4 while maintaining an Outperform rating on the stock.
The revision follows the company's first-quarter earnings release, which showed sales figures slightly below market expectations but still in line with company guidance. The adjusted EBITDA for the quarter, however, surpassed both the company's and the consensus estimates.
ThredUp has revised its revenue forecast for the full year to a more conservative figure, although the company noted that April's performance was satisfactory. In a positive development, ThredUp has increased its FY24 adjusted EBITDA margin outlook, which now surpasses the prior consensus estimate. Management is also expecting a positive adjusted EBITDA in the second quarter and beyond.
The company plans to enhance its use of AI and automation, aiming to achieve significant efficiencies. A part of the savings from these efficiencies is expected to be allocated to increased marketing expenditures, marking the first increase in marketing spend since 2021.
Telsey reaffirms its view of ThredUp as a leader in the resale market, which is the largest and fastest-growing segment in apparel retailing. The firm believes ThredUp's unique online platform and supply chain capabilities provide a seamless shopping experience in a still-fragmented market.
Despite the positive aspects, the adjustment in the price target to $3 reflects a moderated sales outlook. The new target is based on a multiple of 0.9x Telsey's two-year forward sales estimate of $355.9 million, which aligns closely with the one-year next twelve months (NTM) average multiple of 0.8x.
InvestingPro Insights
ThredUp's (NASDAQ:TDUP) recent performance and future outlook can be further illuminated by considering selected real-time data and InvestingPro Tips. Notably, the company has demonstrated an impressive gross profit margin of 66.39% over the last twelve months as of Q4 2023, which underscores its ability to maintain profitability at the core operational level. This aligns with Telsey Advisory Group's recognition of ThredUp's strengths in the online resale market.
On the flip side, ThredUp is quickly burning through cash and analysts do not anticipate the company will be profitable this year, which may be a concern for investors looking for near-term profitability. The company also operates with a moderate level of debt, which is an important consideration for the risk profile of the investment.
The market capitalization stands at an adjusted $205 million, and despite the lack of dividend payments to shareholders, ThredUp has seen a significant return over the last week, with a price total return of 16.25%. This could indicate a potential rebound or investor optimism following recent developments.
To delve deeper into ThredUp's financial health and future prospects, investors can explore additional InvestingPro Tips. There are currently 9 more tips available, which can provide a comprehensive analysis of the company's performance and position. Interested readers can use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription at InvestingPro for a more detailed investment analysis.
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