On Friday, Piper Sandler adjusted its outlook on Savers Value Village Inc (NYSE:SVV), reducing the price target to $19 from the previous $24, while keeping an Overweight rating on the stock.
The adjustment comes after the company reported first-quarter results that did not meet expectations, with sales, comparable store sales, and earnings per share all falling short. The underperformance was attributed to a late-quarter slump in Canada, where the company generates 40% of its sales, amid a weak economy.
The recent quarter marks the third consecutive time Savers Value Village has reported earnings that disappointed investors. Despite the lower earnings, the company has announced its expansion into the Southeast through the acquisition of a seven-store chain and a change in its Chief Financial Officer. Management has set the comparable store sales guidance to the lower end of the 2%-3% range, but raised net income guidance due to decreased interest expenses.
Piper Sandler's maintained Overweight rating reflects a belief in the company's long-term potential and store growth prospects. The firm acknowledges the recent sell-off in the stock but still views the company's long-term opportunity as highly compelling. However, due to reduced confidence in the stability of the company's operating results, the firm has lowered the EBITDA multiple from 12 times to 10 times, leading to the new price target of $19.
InvestingPro Insights
As Savers Value Village Inc (NYSE:SVV) navigates through a period of recalibration, InvestingPro data provides a deeper look into the company's financial health and market position. With a market capitalization of $2.77 billion and a high P/E ratio of 51.21, which adjusts to 41.49 on a last twelve months basis as of Q4 2023, the company's valuation reflects investor optimism about future earnings growth. This is further substantiated by a Price / Book multiple of 7.36, indicating a premium that the market is willing to pay over the company's book value.
InvestingPro Tips highlight that SVV is expected to grow net income this year, which aligns with Piper Sandler's raised net income guidance. Analysts predict profitability, which is supported by the company's performance over the last twelve months. However, the high earnings multiple and Price / Book ratio suggest that much of this optimism may already be priced into the stock. Additionally, the significant price uptick of 41.15% over the last six months could be indicative of market sentiment heating up. It's worth noting that SVV does not offer a dividend, which may influence investment decisions for income-focused shareholders.
For investors seeking a comprehensive analysis, there are 7 additional InvestingPro Tips available at https://www.investing.com/pro/SVV, which may offer further insights into SVV's financial metrics and market predictions. Utilize coupon code PRONEWS24 to receive an additional 10% off a yearly or biyearly Pro and Pro+ subscription, unlocking a wealth of data and expert analysis to guide investment decisions.
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