On Friday, BofA Securities resumed coverage of Torrid Holdings Inc (NYSE: CURV) shares, a retailer specializing in plus-size women's apparel, intimates, and accessories. The firm issued a Buy rating for the company's stock, accompanied by a price target of $5.00. According to InvestingPro analysis, the stock appears undervalued at its current price of $3.64, with metrics suggesting potential upside.
The analyst at BofA Securities highlighted Torrid as a disruptive force in the plus-size apparel market, focusing on women aged 25-40 and sizes 10-30. The company is recognized for its emphasis on fit and is seen as having a significant turnaround opportunity.
With a healthy gross margin of 37.6% and annual revenue of $1.12 billion, Torrid has demonstrated its market presence. According to the analyst, Torrid has recently made substantial enhancements to its product lineup and has successfully adjusted its inventory levels under new management.
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The positive outlook is partly based on Torrid's position within a large, expanding, and underserved total addressable market (TAM). The company's current EV/EBITDA ratio stands at 9.1x, with EBITDA reaching $89.3 million.
The analyst's price objective is derived from a valuation that is seven times the projected fiscal year 2025 enterprise value to earnings before interest, taxes, depreciation, and amortization (EV/EBITDA), which aligns with the average for its young adult specialty retail peers.
The company, which has struggled with product innovation and new offerings since 2022, is now believed to be on a more promising path. Despite a challenging six-month period that saw the stock decline by 45%, the improvements in its assortment and inventory management are central to Torrid's strategy for navigating the competitive retail landscape.
By setting a price target of $5.00, BofA Securities signals confidence in Torrid's potential for growth and profitability. The Buy rating suggests that the firm views the stock as a favorable investment opportunity within the specialty retail sector.
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