On Thursday, BMO Capital adjusted its outlook on Arko Corp (NASDAQ: ARKO), reducing the price target from $8.00 to $7.00 while maintaining a Market Perform rating. The decision follows Arko's fourth-quarter earnings, where the company reported an adjusted EBITDA that did not meet expectations, primarily due to a decline in fuel gallons sold and weaker margins.
The company also issued its first guidance for the first quarter and the full year 2024, anticipating a mid-single to high-single-digit percentage decline in EBITDA. This projection is partly based on an expected slight decrease in year-over-year retail consumer packaged goods (CPGs) at the midpoint.
BMO's revised price target is based on approximately 7 times the firm's projected 2025 EBITDA of $260 million, which is anticipated to remain flat year-over-year, with retail CPGs at 39.5 and comparable gallons down by 5%. The firm also noted potential risks, suggesting that the price target could be further reduced to a multiple of 5 times EBITDA, aligning with other companies in the sector that are experiencing secular declines, should Arko's organic growth trends continue to weaken.
InvestingPro Insights
In light of BMO Capital's recent adjustment of Arko Corp's price target, InvestingPro data and tips provide additional context for investors considering the company's stock. Despite the disappointing fourth-quarter earnings and the revised outlook, there are some positive signs worth noting. For instance, Arko's liquid assets are reported to exceed its short-term obligations, which could provide some financial stability in the near term.
According to the latest InvestingPro data, Arko Corp's market capitalization stands at $778.99 million. The company's revenue over the last twelve months as of Q4 2023 is $9.41 billion, with a modest revenue growth of 2.95%. The gross profit margin during the same period is 26.11%, indicating the company's ability to maintain profitability despite the challenges faced in the fuel and retail sectors.
Moreover, analysts predict that Arko will be profitable this year, which is a crucial factor for investors to consider. The stock is currently trading near its 52-week low, and the RSI suggests it is in oversold territory, potentially signaling a buying opportunity for value investors.
For those interested in a deeper analysis, there are additional InvestingPro Tips available, including six more that could provide further insights into Arko's financial health and future prospects. To access these tips and gain a comprehensive investment analysis, use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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