On Friday, Telsey Advisory Group adjusted its price target for Arhaus Inc (NASDAQ:ARHS) shares, a premium home furnishings retailer, to $15.00, a decrease from the previous target of $18.00. Despite the reduction, the firm maintains its Outperform rating on the company's stock.
The adjustment follows a revision of the company's 2024 guidance, which was notably reduced. While expressing disappointment and surprise at the negative turn in Arhaus's business prospects and the extent of the guidance cut, Telsey remains optimistic about the company's long-term position.
The firm cites Arhaus's distinctive product offerings, expanding showroom footprint, improved distribution efficiency, and enhanced technology infrastructure as key factors underpinning its continued favorable outlook.
The new price target of $15.00 is based on applying an enterprise value to earnings before interest, taxes, depreciation, and amortization (EV/EBITDA) multiple of approximately 10 times to Telsey's updated 2025 EBITDA estimate for Arhaus. This estimate has been revised downward from $225 million to $184 million.
The reduction in the price target and EBITDA forecast reflects the immediate challenges faced by Arhaus, yet Telsey's Outperform rating signals confidence in the company's ability to navigate the current market conditions. The firm anticipates that Arhaus will be in a strong position to capitalize on improvements in the housing market in the coming years.
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