On Tuesday, KeyBanc Capital Markets maintained its positive stance on Upbound Group (NASDAQ:UPBD), reiterating an Overweight rating and a $41.00 price target for the company's stock. KeyBanc's analysis highlights Upbound Group's recent performance, noting a turning point with accelerating Gross Merchandise Volume (GMV) growth in its direct segment and an upward trend in same-store sales within its retail division.
Upbound Group, facing industry challenges such as lower consumer spending and difficulties in end markets including furniture and consumer electronics, has shown signs of resilience. The company's guidance indicates a substantial increase in earnings per share (EPS) growth for the second half of the year. KeyBanc has expressed confidence in these projections, citing the current business trajectory as a foundation for these expectations.
The firm's valuation of Upbound Group appears to be a significant factor in maintaining the Overweight rating. KeyBanc points to the company's attractive valuation metrics, specifically a price-to-earnings (P/E) ratio of 7.7 times and a free cash flow (FCF) yield of 8.4%, based on the 2025 estimates. The investment firm believes that these figures support the positive outlook for Upbound Group's shares.
The analyst's commentary underscores the belief that despite the broader industry's headwinds, Upbound Group is positioned to achieve stronger EPS growth in the latter half of the year. The company's performance, particularly in its direct and retail segments, is seen as a critical factor in this anticipated growth.
In summary, KeyBanc's reaffirmed Overweight rating and $41.00 price target reflect expectations of continued growth and an attractive investment opportunity in Upbound Group, supported by the company's financial metrics and positive trends in key segments of its business.
In other recent news, Upbound Group has reported strong Q1 results for 2024. The company recorded revenues close to $1.1 billion, an adjusted EBITDA of $109 million, and non-GAAP earnings per share of $0.79. These positive results are attributed to an increase in merchant count, better performance of existing merchants, disciplined expense management, and a strong showing in direct-to-consumer e-commerce channels.
The company remains on track to meet its full-year targets, bolstered by a stable macroeconomic environment and a customer-centric approach. The Acima segment reported a 20% year-over-year GMV increase, and Rent-A-Center (NASDAQ:UPBD) posted its first positive same-store sales growth in two years. Upbound Group is also investing in digital tools and customer experience enhancements, including a new point of sale system and plans for private label credit cards.
Despite a decrease in consolidated gross margin by 150 basis points, largely due to Acima's performance, and a 2.2% year-over-year decline in consolidated adjusted EBITDA, the company remains optimistic about future growth.
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