On Monday, Roth/MKM maintained its Neutral stance on Fox Factory Holding (NASDAQ:FOXF) with a consistent price target of $45.00. The firm's position follows recent meetings with Fox Factory's management, including CFO and President of Aftermarket Applications Group, Dennis Schemm, in Denver and the Los Angeles region.
The company's stock is believed to be at or near its lowest point, with no fundamental shifts detected in the core Fox Shox business. This assessment comes after Roth/MKM's in-depth discussions with the company's executives. The firm gained insights into Fox's acquisition of Marucci, a baseball bat brand, deciphering the strategic fit for Fox Factory in this venture.
Despite understanding the potential advantages Fox Factory could reap from owning Marucci, negative investor sentiment is a significant factor in Roth/MKM's decision to remain on the sidelines. The analyst firm suggests that this sentiment is influencing their cautious approach, opting not to change the stock's rating at this time.
Fox Factory Holding, renowned for its performance-defining ride dynamics products for bicycles, motorcycles, ATVs, UTVs, and automotive applications, has not experienced any fundamental changes to its business, according to Roth/MKM's analysis. This indicates stability in the company's operations despite the broader market's perception.
The maintained price target of $45.00 reflects Roth/MKM's current valuation of Fox Factory's stock. Investors and market watchers will continue to monitor the company's performance and investor sentiment to gauge any potential shifts in stock valuation.
In other recent news, Fox Factory Holding Corp. reported a 4.5% increase in net sales to $348.5 million for the second quarter of fiscal 2024, alongside an adjusted earnings per share of $0.38. This growth is attributed to effective expense controls and productivity optimization, resulting in an improved adjusted EBITDA margin of 12.7%.
Despite challenges in bike and automotive segments, Fox Factory maintains a positive outlook, with revised full-year guidance projecting sales between $1.407 billion and $1.477 billion, and adjusted earnings per diluted share ranging from $1.40 to $1.72.
Following these developments, Fox Factory announced leadership transitions, with Dennis Schemm appointed as President of AAG and Brendan Enick as Treasurer. The company also reported a decline in net sales for the Powered Vehicle Group, balanced by growth in the Automotive Aftermarket Group and increased bike revenue in the Specialty Sports Group.
Fox Factory has also entered into an exclusive license agreement with MLB for Marucci and Victus bats starting in 2025. The company's expectations of continued growth are based on a focus on driving innovation and maintaining market share, despite industry challenges and macroeconomic headwinds. The company's aftermarket business, contributing 57% of sales, along with new products and partnerships, underpin these recent developments.
InvestingPro Insights
Recent InvestingPro data offers additional context to Roth/MKM's analysis of Fox Factory Holding (NASDAQ:FOXF). The company's market capitalization stands at $1.74 billion, with a P/E ratio of 42.5, indicating a relatively high earnings multiple. This aligns with one of the InvestingPro Tips, which notes that FOXF is "trading at a high earnings multiple."
The company's revenue for the last twelve months as of Q2 2024 was $1.35 billion, with a gross profit margin of 31.71%. However, the revenue growth rate for the same period was -16.86%, suggesting some challenges in top-line expansion. This decline in revenue growth could be contributing to the negative investor sentiment mentioned in the article.
InvestingPro Tips also highlight that FOXF's stock price has "fallen significantly over the last year," which is corroborated by the 1-year price total return of -57.8%. This substantial decline aligns with Roth/MKM's observation that the stock may be near its lowest point.
Despite these challenges, InvestingPro Tips indicate that analysts predict the company will be profitable this year, and it has been profitable over the last twelve months. This profitability, combined with the fact that "liquid assets exceed short-term obligations," suggests a level of financial stability that may support the company as it navigates current market conditions.
For investors seeking a more comprehensive analysis, InvestingPro offers 5 additional tips for FOXF, providing a deeper understanding of the company's financial position and market performance.
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