On Wednesday, DA Davidson downgraded shares of 1-800-FLOWERS.COM (NASDAQ:FLWS) from Neutral to Underperform, adjusting the price target to $8.00 from the previous $9.00. The firm cited concerns over weaker-than-expected sales trends and potential underperformance in the upcoming fiscal quarter.
Data from Bloomberg debit card transactions, which are highly correlated with the company's sales, indicate a further decline in year-over-year sales for the fourth fiscal quarter of 2024 (F4Q24), dropping to -15% from -13% in the third fiscal quarter (F3Q24). This trend suggests that the consensus estimate for a 6% year-over-year decrease in F4Q24 sales may be overly optimistic.
The firm also expressed caution regarding the company's outlook for the fiscal year 2025 (FY25), anticipating that 1-800-FLOWERS.COM might project guidance below current market expectations. Factors contributing to this outlook include persistently low consumer sentiment, a sluggish everyday gifting market, and potential cost inflation pressures.
In response to these concerns, DA Davidson has reduced its sales and EBITDA (earnings before interest, taxes, depreciation, and amortization) forecasts for the company to figures below the consensus estimates.
Additionally, the firm has lowered its target multiple from 5.5x to 5.0x. The revised price target is based on a 5.0x multiple of the projected calendar year 2025 EBITDA, which has been adjusted downward from $109 million to $106 million.
The downgrade reflects a cautious stance on the stock's performance due to the anticipated shortfall in sales and the challenging conditions that may impact the company's financial guidance. Investors are advised to consider these updated estimates as they assess the potential risks and rewards associated with 1-800-FLOWERS.COM's stock.
In other recent news, 1-800-FLOWERS.COM has been a subject of financial discussion due to its third fiscal quarter earnings report and subsequent analyst adjustments. The company reported a 9.1% decline in third-quarter revenue and a net loss of $16.9 million. Notably, the company has seen improvements in e-commerce revenue trends and gross margin due to cost optimization and lower commodity costs.
Following these results, DA Davidson revised its price target for 1-800-FLOWERS.COM, reducing it to $9.00 from the previous $9.50, while maintaining a neutral stance on the stock. The firm also expects a 2% year-over-year decline in sales for the fiscal year 2025, a shift from the previously projected 3% increase. Additionally, the EBITDA estimate has been moderated to a 5% growth from the earlier expectation of an 11% rise year-over-year.
In response to ongoing sales decline, 1-800-FLOWERS.COM has reduced its workforce, which is expected to decrease general and administrative expenses by approximately $10 million annually starting in the fourth fiscal quarter of 2024. The company also acquired Card Isle, aiming to boost its personalized greeting card offerings.
InvestingPro Insights
The recent downgrade of 1-800-FLOWERS.COM (NASDAQ:FLWS) by DA Davidson aligns with some of the concerns reflected in the latest InvestingPro data and tips. According to real-time metrics, the company's market cap stands at $706.31M, and it is trading near its 52-week high with a price of 96.32% of the peak. This proximity to the high contrasts with the company's negative revenue growth over the last twelve months as of Q3 2024, which was -11.19%. Moreover, the stock's performance has been quite volatile, with significant returns over the last week, month, and three months, showing increases of 16.03%, 15.91%, and 27.31%, respectively. However, analysts have revised their earnings downwards for the upcoming period, which could indicate potential challenges ahead.
InvestingPro Tips suggest that while net income is expected to grow this year, the stock is currently in overbought territory according to the RSI, which may signal caution for short-term investors. Additionally, the company operates with a moderate level of debt and has liquid assets that exceed short-term obligations, providing some financial stability. For those looking for a more in-depth analysis, there are over 10 additional InvestingPro Tips available, which can be accessed by visiting https://www.investing.com/pro/FLWS. To enhance your investment research on 1-800-FLOWERS.COM, consider using the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription.
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