On Friday, Roth/MKM maintained a Buy rating on Sow Good (NASDAQ: SOWG), while reducing the price target to $17.00 from the previous $21.00.
The adjustment follows the company's second-quarter 2024 financial report, which has led to a revision of estimates. The new forecasts for 2024 anticipate that Sow Good's shipments will restart in the late third quarter and that key retailers Five Below (NASDAQ:FIVE) and Target will recalibrate their orders at lower levels than initially expected.
For the fiscal year 2025, the firm has also decreased revenue estimates, citing the same rationale of reduced productivity from these major retailers. However, the impact on Sow Good's EBITDA for 2025 is expected to be less significant.
This is attributed to an anticipated improvement in Gross Profit Margin (GPM) that should largely counterbalance the effects of reduced scale and the de-leveraging of Selling, General & Administrative (SG&A) expenses.
The analyst expressed a belief that Sow Good's stock price might stay within a certain range in the short term until there is clearer visibility on the company's operations. Despite the near-term uncertainty and the lowered price target, the firm reiterates its confidence in Sow Good's long-term prospects, especially as the company expands its distribution network.
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