On Tuesday, TD Cowen adjusted its stock price target for Fortrea (NASDAQ:FTRE), a company listed on the NASDAQ stock exchange, reducing the target to $23.00 from the previous $27.00. The firm maintained its Hold rating on the stock. The new price target reflects a more cautious stance due to Fortrea's preliminary guidance for 2025, which anticipates an adjusted EBITDA margin of 11-12% and a growth of 30-40%.
The guidance provided by Fortrea's management suggests that revenue growth might remain flat. This outlook is based on the expectation that the business-to-business (B2B) multiplier will reach 1.2 times in the second half of 2024, which would require a 20% improvement in bookings in the latter half of the year compared to the first half.
TD Cowen highlighted Fortrea's strong pipeline growth and its recent formation of partnerships and deals with top 20 companies. Despite these positive developments, the analyst expressed concerns over the ambitious nature of the targets set by Fortrea's management. Achieving such objectives, according to the analyst, would necessitate nearly flawless execution and a favorable macroeconomic environment.
The analyst's comments underline the challenges Fortrea may face in meeting its 2025 goals, emphasizing the need for significant improvement in second-half bookings and the influence of broader economic conditions on the company's performance.
In other recent news, Fortrea has experienced a series of financial adjustments following its second-quarter results for 2024. Analyst firm Mizuho lowered its price target for Fortrea from $27 to $22, maintaining a neutral outlook. This decision was influenced by slower-than-expected bookings and a less favorable business mix, leading to Fortrea's downward revision of its 2024 earnings outlook.
Similarly, Citi reduced its price target for the company from $42 to $30, while keeping a 'Buy' rating. Despite a decline in Q2 revenue by 8.6% year-on-year and adjusted EBITDA down by 23.2%, Fortrea has secured strategic partnerships with top pharmaceutical customers and launched two new offerings.
Looking ahead, Fortrea has lowered its full-year 2024 revenue guidance to $2.7 billion to $2.75 billion and revised its adjusted EBITDA target for 2024 to $220 million to $240 million. These recent developments reflect the current market conditions and their impact on Fortrea's business trajectory.
InvestingPro Insights
In light of TD Cowen's revised price target for Fortrea (NASDAQ:FTRE), a closer look at the company's financial metrics and market performance provides additional context. According to InvestingPro data, Fortrea has a market capitalization of approximately $1.79 billion.
Despite recent challenges, analysts predict that Fortrea's net income is expected to grow this year, which aligns with the company's guidance for an adjusted EBITDA margin increase. However, it's worth noting that the company is not currently profitable, with a negative P/E ratio over the last twelve months as of Q2 2024, reflecting the difficulties Fortrea faces in achieving profitability.
The stock has indeed taken a significant hit, with a one-week price total return of -23.54% and a one-month price total return of -22.92%. This downward trend in share price may concern investors, but it is important to consider that Fortrea is trading at a high EBITDA valuation multiple, which suggests that the market may have already priced in some of the growth expectations. Moreover, Fortrea does not pay a dividend, which could influence the investment decisions of income-focused shareholders.
For those considering an investment in Fortrea, InvestingPro offers additional insights and tips, with a total of 8 tips available, including an analysis on the stock's valuation and free cash flow yield. To explore these further, investors can visit https://www.investing.com/pro/FTRE for a comprehensive view of Fortrea's financial health and market potential.
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