On Thursday, Loop Capital adjusted its outlook on Katapult Holdings (NASDAQ:KPLT), reducing the price target to $15.00 from the previous $20.00, but kept a Hold rating on the stock. The firm expressed concerns after Katapult reported a gross origination shortfall for the second quarter of 2024, marking it as the second successive quarter with only low-single-digit percentage growth. This performance comes after last year's more robust mid-teens percentage increase.
Loop Capital's analysis points to skepticism regarding the company's gross origination growth forecast for 2024. Katapult's projections suggest a significant uptick in the second half of the year, which would require a notable reversal in the recent sales trends of its largest retail partner, Wayfair (NYSE:W). The firm's doubts about this projected growth have prompted the reduction in the price target.
The report highlighted the consecutive quarters of underwhelming growth as a key factor in reassessing the stock's potential. Despite last year's stronger growth figures, the recent trend has not met the firm's expectations. The analyst from Loop Capital indicated a clear disappointment in the company's recent performance, especially when compared to the previous year's results.
Katapult's reliance on its partnership with Wayfair for revenue generation is significant, and the current trajectory of Wayfair's sales is a major concern for the firm. The analyst underscored the importance of this relationship and its influence on Katapult's financial forecasts.
In summary, Loop Capital's revised price target for Katapult Holdings reflects a cautious stance on the company's near-term growth prospects. The firm maintains a neutral Hold rating, awaiting evidence of the company's ability to meet its ambitious growth targets in the latter half of 2024.
In other recent news, Katapult Holdings has reported its financial results for Q2 2024, demonstrating growth in several key areas despite some economic challenges. The company reported an increase in gross originations, revenue, and a reduction in adjusted EBITDA loss. Its non-Wayfair gross originations saw nearly 20% growth, indicating an expansion in the company's market presence beyond its partnership with Wayfair. A significant contribution to the quarter's gross originations, approximately 28%, came from the successful Katapult Pay product.
The company's gross originations rose by 1.1% to $55.3 million, with revenue increasing by 8.7% to $58.9 million, and gross profit growing by 5% to $9.9 million. The adjusted EBITDA loss improved to $377,000. Additionally, Katapult added over 70 new merchants, with expectations of significant volume growth. The company is also actively exploring refinancing options for its debt.
Looking forward, Katapult anticipates gross origination growth of 8-10% and revenue growth of 7-8% for Q3. The company reaffirms a minimum 10% growth in gross originations and revenue for the entire year of 2024. It also expects to be cash accretive after 2025, with positive income from operations as early as 2025.
InvestingPro Insights
As Katapult Holdings (NASDAQ:KPLT) faces scrutiny over its growth prospects and financial health, real-time data and insights from InvestingPro can provide investors with a clearer picture of the company's current standing. According to the latest metrics, Katapult has a market capitalization of $56.25 million, indicating a relatively small player in the market. The company's revenue growth over the last twelve months as of Q1 2024 stands at 13.12%, which, despite being positive, must be weighed against the backdrop of the company's high price volatility and recent stock performance.
InvestingPro Tips highlight critical concerns for investors, such as the company's rapid cash burn and analysts' expectations that Katapult will not be profitable this year. Additionally, while the company's liquid assets exceed short-term obligations, providing some financial cushion, the stock has experienced significant declines over various time frames, including a 27.44% drop over the last month. These factors are essential considerations for investors assessing the company's ability to reverse recent sales trends and achieve its growth forecasts.
For those looking for more in-depth analysis, there are additional InvestingPro Tips available, offering further insights into Katapult's financial health and stock performance. With the next earnings date set for August 14, 2024, investors will be keenly watching for signs of improvement or further challenges ahead.
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