TD Cowen has adjusted its outlook on Arhaus Inc (NASDAQ:ARHS), a home furnishings retailer. The firm's analyst, Max Rakhlenko, reduced the price target on the company's shares to $14 from the previous $19, while still maintaining a Buy rating on the stock.
The adjustment comes in response to a sharper than anticipated decline in July demand, which decelerated to the high-teens percentage range.
The analysis by TD Cowen indicates an approximate 20 percentage point deceleration on a two-year month-over-month basis. Moreover, the second half of the year's revenue and EBITDA forecasts have been revised downward more significantly than initially expected.
Management attributes this downturn to macroeconomic factors rather than increased competition, particularly noting that market share remained stable and was not lost to competitors such as RH (NYSE:RH).
The analyst also noted that promotional margin pressure was an unexpected challenge for Arhaus. The guidance provided by the company suggests that there may be room for additional promotions in the near term.
Recently, Baird maintained an Outperform rating on the company but lowered its price target to $14 due to a slowdown in demand and a cut in fiscal year 2024 guidance. Similarly, Telsey Advisory Group decreased its price target to $15, despite maintaining an Outperform rating, following a significant reduction in the company's 2024 guidance.
On the other hand, Stifel initiated coverage of Arhaus with a Buy rating and a price target of $19.50, recognizing the company's consistent execution and revenue growth. However, Jefferies downgraded Arhaus from Buy to Hold and reduced its price target to $16 due to shifts in consumer behavior and concerns about margin growth.
InvestingPro Insights
In light of TD Cowen's revised outlook on Arhaus Inc (NASDAQ:ARHS), InvestingPro offers additional context. The company's stock has indeed taken a significant hit over the last week, with a one-week price total return of -11.42%, and has fared poorly over the last month, with a -17.57% return. This recent performance aligns with the analyst's observations of a sharper than anticipated decline in demand. Moreover, Arhaus is currently trading at a high Price / Book multiple of 5.53, which may be a point of consideration for investors looking at the company's valuation metrics.
Despite these challenges, Arhaus operates with a moderate level of debt and has been profitable over the last twelve months, with a reported operating income margin of 10.71%. Analysts predict the company will maintain profitability this year. For those interested in exploring more about Arhaus's financial health, InvestingPro provides additional tips and metrics. Currently, there are 6 more InvestingPro Tips available for ARHS, which can be found at InvestingPro.
InvestingPro's real-time data also reveals an adjusted market cap of $1.7 billion and a P/E ratio of 19.21, suggesting a certain level of investor confidence in future earnings. While the immediate outlook may seem challenging, these metrics could offer a broader perspective on the company's longer-term potential.
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