On Tuesday, DA Davidson showed confidence in Waldencast Acquisition Corp. (NASDAQ: WALD) by increasing the price target to $7.50 from the previous $7.25. The firm has sustained its Buy rating on the company's stock. According to InvestingPro data, analyst targets range from $5.00 to $7.50, suggesting significant upside potential from the current price of $3.25.
Waldencast, which operates Obagi Skincare and Milk Makeup, reported over 20% sales increase for both brands, surpassing the estimates set by analysts. The company maintains impressive gross profit margins of 69.71%, as revealed by InvestingPro analysis. DA Davidson has kept its fourth-quarter 2024 sales growth projection at 28% year-over-year and has upped its EBITDA forecast to $10.7 million, an increase from the previously estimated $10.1 million.
The firm's analysts have also revised their EBITDA expectations for the year 2024, now anticipating a 63% year-over-year increase to $40 million. This is a 9% elevation from their prior forecast. Waldencast has confirmed its guidance for a mid-teens EBITDA margin for 2024, leading DA Davidson to raise their margin estimate to 14.6%, up from 13.6%, compared to 11.2% in 2023.
In setting the new price target, DA Davidson has taken into account the lower valuations currently seen in the beauty industry. The firm has reduced the target enterprise value-to-EBITDA multiple to 21 times from 27 times, while also rolling forward to the next year. The new price target is based on the 21 times multiple applied to the estimated $63 million EBITDA for the year 2026. Despite the stock's 70.57% decline year-to-date, analysts maintain a bullish outlook, supported by the company's strong gross margins and growth prospects.
In other recent news, Waldencast has reported significant developments in both its board structure and financial performance. The company has expanded its board with three new directors, namely Hind Sebti, Kelly Brookie, and Roberto Thompson Motta, each bringing distinct expertise in beauty, financial, and consumer products sectors respectively. This expansion is expected to bolster Waldencast's strategic execution.
On the financial front, Waldencast's second-quarter sales have exceeded expectations, leading investment firm DA Davidson to raise its stock target for the company from $6.50 to $7.25. DA Davidson has also revised its 2024 sales growth estimate for Waldencast to 24% year-over-year, up from the initially projected 15%, and increased its EBITDA estimates by 7%. The new price target is based on a 27-times multiple of the firm's revised 2025 EBITDA projection of $50 million.
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