On Monday, Roth/MKM adjusted its outlook for American Outdoor Brands Inc. (NASDAQ: NASDAQ:AOUT), increasing the stock's price target to $11 from $10 while maintaining a Buy rating. The firm recognized the company's revenue performance in the third fiscal quarter, which saw an 8% year-over-year growth in the Traditional channel. This revenue increase was tempered by weaker gross margins due to higher freight costs impacting inventory, yet the company's operational expenditure discipline allowed for adjusted EBITDA to surpass the consensus and Roth/MKM's own estimates.
American Outdoor Brands reported stable demand within the outdoor and shooting sports markets, with positive trends in point-of-sale data and incoming replenishment orders. The company's annual guidance has been essentially narrowed and reiterated, providing a consistent outlook for fiscal year 2024. Consequently, Roth/MKM's estimates for that period remain stable.
Looking forward to fiscal year 2025, the firm has slightly raised its expectations. This adjustment reflects confidence in the company's ability to maintain its performance and navigate the market effectively. The reiteration of the Buy rating alongside the increased price target underscores the firm's positive view on American Outdoor Brands' prospects.
The analyst from Roth/MKM highlighted the company's success in managing operational costs, which contributed to the adjusted EBITDA results. Despite the challenges posed by increased freight costs, the company's discipline in operational expenditures helped in offsetting the impact on gross margins.
In summary, the price target increase to $11 from $10 by Roth/MKM for American Outdoor Brands is attributed to a solid third fiscal quarter revenue performance, stable demand in key markets, and effective operational cost management. The company's guidance for the upcoming fiscal years indicates steady performance, supporting the firm's optimistic stance on the stock's valuation.
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