On Tuesday, Roth/MKM adjusted their outlook on Wag! Group Co. (NASDAQ: PET) shares, reducing the price target to $3.50 from the previous $4.00. The firm continues to endorse a Buy rating on the stock, despite the adjustment.
This decision follows Wag's recent pre-announcement of its second-quarter results, which indicated revenues falling short of expectations but showcased better-than-anticipated profitability.
The company has also updated its full-year 2024 forecast, now expecting lower revenue but increased profitability. In response to these developments, Roth/MKM has updated its financial model to align with Wag's pre-announced second-quarter figures and the revised guidance for 2024. The firm's updated model positions them on the conservative end for revenue projections but at the midpoint concerning adjusted EBITDA expectations.
According to the analyst from Roth/MKM, the maintenance of the Buy rating reflects the firm's positive outlook on Wag's profitability despite the lower revenue forecast. The reduced price target is a direct result of the adjusted sales expectations for the company.
Wag! Group Co. is navigating through its financial year with a revised perspective, balancing a dip in revenue with a more optimistic profitability outlook. Roth/MKM's stance indicates that while the revenue stream may not be as strong as previously anticipated, the potential for profitability is sufficient to sustain a positive investment recommendation.
Investors and market watchers will be keeping a close eye on Wag's performance, particularly in terms of how well the company manages to align with the revised projections. The updated guidance and financial modeling by analysts serve as a navigational tool for understanding Wag's current position and future potential in the market.
In other recent news, Wag! Group Co. reported mixed second-quarter results, with revenues between $18.5 million and $19 million and a net loss ranging from $2.2 million to $2.4 million.
However, adjusted EBITDA figures showed a positive range of $1.5 million to $1.7 million. DA Davidson has adjusted the price target for Wag! from $6.00 to $3.50, maintaining a Buy recommendation, and projects 2024 revenue to reach $109.3 million.
The company has made strategic changes to optimize spending and enhance free cash flow, transitioning to a fully remote workforce and reducing headcount by more than 10%.
Wag! anticipates that the holiday season will boost demand for overnight services and pet insurance, and it has factored in macroeconomic trends into its financial performance forecasts.
Wag! has also launched Furscription, a digital tool for veterinary staff, and WeCompare, a consumer brand for insurance product comparison. The company expects these initiatives to support growth acceleration in the latter half of 2024. These are the recent developments in the company's financial performance and strategic initiatives.
InvestingPro Insights
Following the recent adjustments in Wag! Group Co.'s (NASDAQ: PET) financial outlook and the subsequent changes in analyst expectations, it's crucial for investors to consider the company's performance from a data-driven perspective. According to real-time data from InvestingPro, Wag! Group Co. boasts a gross profit margin of 76.79% for the last twelve months as of Q1 2024, underscoring the company's impressive ability to manage costs relative to revenue. Despite challenges in profitability, as the company is not expected to be profitable this year, the revenue growth remains robust, with a 31.43% increase over the last twelve months as of Q1 2024.
InvestingPro Tips highlight that while analysts are not anticipating the company to be profitable this year, they do expect sales growth in the current year. This aligns with the positive outlook on Wag's profitability as indicated by Roth/MKM's Buy rating. Additionally, the company operates with a moderate level of debt, which can be a strategic advantage in navigating its financial course. It's worth noting that Wag's stock price has experienced a significant drop over the last three months, presenting potential value opportunities for investors.
For investors looking to delve deeper into Wag! Group Co.'s financials and future outlook, there are additional InvestingPro Tips available. By using coupon code PRONEWS24, investors can get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription, unlocking access to a wealth of expert analysis and data to inform their investment decisions.
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