On Thursday, TD Cowen showed confidence in Arhaus Inc (NASDAQ:ARHS), as the firm raised its price target on the company's stock to $17.00 from $14.00, while retaining an Outperform rating. The adjustment reflects a positive outlook based on several key factors observed by the firm's analysis.
The firm's analyst highlighted Arhaus's robust market share growth, noting a significant uptick in demand comparisons, which turned to mid-single-digit growth in February. This performance indicates a strong trajectory for the furniture retailer in capturing a larger segment of the market.
In addition to market share gains, Arhaus is also expected to see an improvement in its EBITDA margins. The guidance provided by the company suggests better-than-anticipated core margins, which are projected to be up year-over-year. This is noteworthy even when considering the additional system costs that the company has incurred.
The analyst also pointed out that the noise from promotions and gross margin headwinds, which have been a concern for the company, are expected to subside by the second half of the year. This could potentially lead to a clearer financial picture and more stable profitability metrics for Arhaus.
Finally, the report mentioned that while the implementation of new systems is intended to support efficient growth for Arhaus, it may also bring short-term disruptions and margin risks. Nevertheless, these system enhancements are seen as a necessary step for the company to sustain its growth trajectory.
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