On Thursday, Turning Point Brands (NYSE:TPB) stock received a Buy rating from Roth/MKM, accompanied by a price target set at $50. The company, known for its portfolio of consumer brands in the nicotine, tobacco, and cannabis markets, is recognized for its strong presence in rolling papers, wraps, and moist snuff tobacco products.
The initiation of coverage by Roth/MKM is based on the company's potential to expand in the modern oral category and its strategic positioning to tap into the alternative channel that serves the U.S. cannabis and hemp industry, valued at approximately $100 billion.
Roth/MKM anticipates that Turning Point Brands will experience a return to high single-digit revenue and EBITDA growth by 2026. This growth is expected to be driven by the scaling of nicotine pouch products and a shift in product mix.
The firm's positive outlook on Turning Point Brands is rooted in the company's ability to leverage its leading brand share and its strategic initiatives aimed at scaling operations within the fast-growing sectors it operates in.
The new price target of $50 reflects Roth/MKM's confidence in Turning Point Brands' growth trajectory and its potential to capitalize on market opportunities in the coming years.
In other recent news, Turning Point Brands has reported a commendable performance in its second quarter, with a 7% increase in adjusted EBITDA to over $27 million. The company has also raised its projected 2024 adjusted EBITDA guidance to a range of $98 million to $102 million, reflecting confidence in its future financial health. This growth was mainly driven by an 8% revenue increase in its Zig-Zag brand, alongside a strong performance in the cigar sector.
Despite a slight 3% decline in the alternative channel during the quarter, the first half of the year saw a significant 28% rise. The company is diversifying its product offerings, with notable growth in its Stoker's and FRE brands. Turning Point Brands also retired a $118.5 million convertible note, ending the quarter with over $140 million in cash.
The company has revised its capital expenditure expectation from $15 million to $11 million and anticipates an effective income tax rate of 23% to 26%. Approximately $4 million is planned for spending on PMTAs for the full year, related to Modern Oral products. These recent developments underscore the company's strategic expansion and commitment to sustained growth.
InvestingPro Insights
Turning Point Brands (NYSE:TPB) has demonstrated a commendable track record, with an InvestingPro Tip highlighting that the company has increased its dividend for seven consecutive years, signaling its commitment to shareholder returns. Additionally, analysts anticipate that Turning Point Brands will be profitable this year, which aligns with the company's recent performance, showing profitability over the last twelve months.
InvestingPro Data reveals a market capitalization of $691.38 million, with a solid price-to-earnings (P/E) ratio of 15.14. This is further supported by a P/E ratio of 14.3 for the last twelve months as of Q2 2024, suggesting a reasonable valuation relative to earnings. The company's strong free cash flow yield is implied by its valuation, as per another InvestingPro Tip, which can be appealing to investors looking for cash-generating investments.
Turning Point Brands also boasts a robust gross profit margin of 51.29% for the last twelve months as of Q2 2024, indicating efficient cost management and profitability. With a notable price uptick of 37.78% over the last six months and a year-to-date price total return of 49.24%, the company's stock performance reflects investor confidence in its growth potential. For more insights, investors can explore additional InvestingPro Tips available for Turning Point Brands at https://www.investing.com/pro/TPB.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.