On Friday, Telsey Advisory Group adjusted its stock price target for AKA Brands Holding Corp (NYSE: NYSE:AKA), increasing it to $28.00 from the previous $25.00 while maintaining a Market Perform rating on the stock. This change follows AKA Brands' report of a third consecutive quarter of sales and adjusted EBITDA that surpassed expectations for the fiscal year 2024.
The company's performance has been interpreted as a positive indicator of stabilization after facing a challenging fiscal year 2023. This is despite ongoing global economic uncertainties. The U.S. market, in particular, has shown robust performance, which has helped to counterbalance persistent difficulties in Australia and New Zealand. AKA Brands has been actively managing its inventory and adopting a test/repeat merchandising strategy.
AKA's growth in the U.S. is supported by strong consumer demand, increased brand recognition from strategic store openings, and an expanded partnership with Nordstrom (NYSE:JWN). This includes bringing Petal + Pup and Princess Polly from online to select Nordstrom stores. Encouraged by these trends, AKA Brands is planning to expand its physical retail presence, including the opening of the first Princess Polly store in New York City early next year.
The company's positive trajectory has led to an upward revision of its financial outlook for FY24. This reflects management's confidence in AKA's ability to continue delivering improved results even in a challenging operating climate.
While the long-term growth potential of AKA's brands is acknowledged, the analyst notes that visibility into the company's ultimate profitability is limited due to competitive pressures in the retail sector and ongoing market challenges in Australia. The new price target of $28 is based on a 0.62x multiple applied to a two-year forward sales forecast of $616 million, which aligns with recent average next twelve months (NTM) multiples.
In other recent news, AKA Brands Holding Corp has reported significant financial growth, with a notable 9.5% increase in net sales in the second quarter, reaching $149 million. The US business sector experienced a substantial 19.3% growth. The company's active customer count also rose by 11.7% on a trailing 12-month basis. Additionally, AKA Brands saw improved gross margins and a 44% year-over-year increase in Adjusted EBITDA to $8 million.
Telsey Advisory Group has adjusted its financial outlook on AKA Brands, increasing the price target to $25 from the previous $20, while maintaining a Market Perform rating on the stock. This decision follows AKA Brands' strong performance in the first half of the fiscal year 2024, marked by two consecutive quarters of better-than-expected results.
The company has outlined ambitious plans for expansion, including the opening of new stores for its Princess Polly brand and enhancing the omni-channel presence of its Petal & Pup brand. However, the company anticipates challenges in Australia due to increased promotional activity and upcoming debt maturities. Despite these challenges, AKA Brands remains confident in its ability to scale its brands profitably and continue its growth trajectory.
InvestingPro Insights
AKA Brands Holding Corp's recent performance aligns with several key insights from InvestingPro. The company has shown a significant return over the last week, with a 8.88% price total return, and an even stronger performance over the last month and three months, with returns of 15.58% and 50.12% respectively. These figures support the positive sentiment expressed in the Telsey Advisory Group's analysis.
InvestingPro Tips highlight that AKA generally trades with high price volatility, which is consistent with the company's recent strong performance and the analyst's upward revision of the price target. Additionally, the tip indicating that liquid assets exceed short-term obligations suggests a solid financial position, potentially supporting the company's expansion plans mentioned in the article.
However, it's worth noting that according to InvestingPro Data, AKA's revenue growth for the last twelve months as of Q3 2024 was 3.31%, with a quarterly growth of 6.44%. While positive, these figures suggest a more modest growth rate compared to the stock's recent price performance.
For investors seeking a more comprehensive analysis, InvestingPro offers 10 additional tips for AKA Brands Holding Corp, providing a deeper understanding of the company's financial health and market position.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.