On Tuesday, Telsey Advisory Group adjusted its stock price target for ThredUp Inc. (NASDAQ:TDUP), a leading online resale platform, decreasing it to $2.00 from the previous $3.00. Despite the price target reduction, the firm retained its Outperform rating on the company's stock.
The revision follows ThredUp's third-quarter results, which showed significant improvement over the second quarter. The company faced challenges earlier in the year due to operational missteps and economic headwinds. However, the recent quarter's performance, particularly in the U.S. market, has been more promising, with both revenue and EBITDA margin exceeding expectations.
ThredUp's management has expressed confidence in the company's recovery, citing the better-than-anticipated results as a sign of a turnaround. Consequently, the firm has raised its financial outlook, suggesting a sustained improvement in profitability, especially within its U.S. operations.
The company is also progressing with its strategic plans, notably the divestiture of its European business, which is expected to be completed by the end of the year. This move is anticipated to allow ThredUp to reallocate resources and further invest in its U.S. business, which remains more profitable.
Moreover, the company's recent investment in artificial intelligence, with the launch of a new suite of tools in August, is intended to optimize and enhance the customer experience.
Telsey highlighted ThredUp's strong position in the rapidly growing resale market, supported by secular trends. The company's proprietary platform and supply chain capabilities are seen as key advantages in a largely fragmented industry.
The revised price target of $2.00 is based on a multiple of 0.8x ThredUp's two-year forward consolidated sales estimate of $306.4 million. This multiple is between the one and three-year next twelve months (NTM) averages of 0.6x and 1.0x, respectively.
In other recent news, ThredUp Inc. reported a notable increase in third-quarter revenue, exceeding analyst predictions. The online resale platform posted a revenue of $73 million, surpassing the projected $70.14 million. However, the company's adjusted loss per share came in at $0.22, a slightly wider loss than the $0.15 analysts had anticipated. Despite this, ThredUp raised its full-year guidance, now expecting 2024 revenue to fall between $300 million and $302 million, an increase from its previous forecast.
In other developments, ThredUp also reported a decrease in active buyers and total orders, with 1.63 million active buyers representing a 7% year-over-year decrease and total orders falling 14% to 1.55 million. Amid these figures, the company announced a potential management buyout of its European business, with plans to concentrate on growth opportunities within the U.S. market.
Lastly, ThredUp reported a gross margin expansion to 71.2% from 69% a year ago and a positive U.S. adjusted EBITDA of $0.7 million, indicating a momentum build in its core marketplace as it heads into the holiday season and towards 2025.
InvestingPro Insights
ThredUp's recent financial data from InvestingPro provides additional context to the Telsey Advisory Group's analysis. The company's market cap stands at $59.39 million, reflecting its current valuation in the market. Despite the challenges mentioned in the article, ThredUp has shown a revenue growth of 8.37% over the last twelve months as of Q2 2024, reaching $322.79 million. This growth aligns with the company's reported improvements in the third quarter.
However, the operating income margin of -19.81% and an adjusted operating income of -$63.95 million for the same period highlight the ongoing profitability challenges ThredUp faces. This data supports the article's mention of the company's focus on improving profitability, particularly in its U.S. operations.
An InvestingPro Tip suggests that ThredUp's stock is trading at a discount to its book value, with a Price to Book ratio of 0.69. This could be seen as an opportunity for investors who believe in the company's turnaround potential, as mentioned in the article.
Another InvestingPro Tip indicates that analysts have recently revised their earnings expectations for ThredUp downwards. This aligns with Telsey's price target reduction but contrasts with the company's raised financial outlook, suggesting a cautious market sentiment.
For investors seeking a deeper understanding of ThredUp's financial position and market potential, InvestingPro offers 15 additional tips that could provide valuable insights into the company's prospects.
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