On Friday, the price target for Vacasa, Inc. (NASDAQ: VCSA) was reduced by Needham, a move driven by both broader economic challenges and company-specific hurdles. The new target stands at $5.00, a decrease from the previous $8.00, yet the firm maintains a Buy rating on the stock.
Vacasa's second quarter results surpassed expectations, which was a contributing factor to Needham's continued endorsement of the stock despite the target adjustment. The vacation rental management company's revenue matched forecasts, but its Adjusted EBITDA of $2 million exceeded the anticipated consensus of a $6 million loss. This outperformance was attributed to the company's effective cost-saving initiatives.
The company's recent restructuring, which involved significant cost reductions announced last quarter, has started to show promise. Vacasa has transitioned to a more localized team structure, which is beginning to yield benefits, although this change is still in the initial phase of implementation.
However, Vacasa is not without its challenges. The supply of properties under Vacasa's management has been declining. This is in contrast to the overall market, where supply is increasing, highlighted by Airbnb's (ABNB) 16% global increase in listings. Needham's revised estimates for Vacasa reflect a cautious outlook for the years 2024 and 2025 due to these ongoing macro and micro challenges.
In other recent news, Vacasa, a prominent vacation rental management company, has reported a substantial downturn in its Q1 2024 earnings. The company disclosed an 18% decline in revenue and a 5% drop in homes under management compared to the previous year.
Amid these challenges, Vacasa has drawn approximately $80 million from its revolving credit facility to increase liquidity and is undertaking a significant corporate restructuring, resulting in the reduction of about 800 employees. The company expects cost savings from the restructuring to exceed $50 million in 2024.
In other developments, KeyBanc maintained its Sector Weight rating on Vacasa, citing ongoing challenges in the non-urban short-term rental market. The firm noted that Vacasa's management now anticipates an EBITDA loss for the year 2024 due to a shift in travel demand away from the company's core markets and higher turnover in property listings.
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