Loop Capital sustained its Hold rating on NASDAQ:UPBD, Upbound Group, with a steady price target of $36.00. The decision follows a week of investor meetings with Upbound's senior management, which included EVP and CFO Fahmi Karam and SVP Strategy & Corporate Development Jeff Chesnut.
The discussions left analysts feeling more positive about the company, especially its Acima segment, due to its potential for growth in Gross Merchandise Volume (GMV) and an expected shift in credit trends.
The analyst noted the optimism was sparked by the Acima business's prospects, citing its significant future GMV opportunities and the anticipated credit trade down. However, despite the positive outlook on the company's revenue prospects, Loop Capital has decided to wait for tangible signs of profitability improvements before altering its rating.
Upbound Group's management shared insights that bolstered confidence in the company's trajectory.
The analyst's commentary highlighted the importance of seeing Upbound's enhanced revenue performance reflected in its profitability metrics. The firm's stance remains cautious, opting to monitor Upbound's financial progress closely.
Loop Capital's analysis suggests that while Upbound shows promise, particularly within its Acima business, investors seeking immediate engagement in the lease-to-own (LTO) market should consider alternatives. PROG Holdings was specifically mentioned as the preferred choice for those looking to invest in the LTO sector.
In summary, Loop Capital's position reflects a watchful approach, acknowledging Upbound Group's potential but requiring more evidence of financial benefit before recommending a stronger investment stance.
The firm's current assessment underscores the significance of profitability as a key factor in their rating decision.
InvestingPro Insights
In light of the recent analysis by Loop Capital, current data from InvestingPro provides additional context for investors considering Upbound Group's stock. The market capitalization of Upbound stands at $1.63 billion, indicating a mid-sized company with room for growth. Despite the cautious outlook by analysts, the company shows a positive revenue growth of 3.99% over the last twelve months as of Q2 2024, with a more robust quarterly uptick of 9.94%. This aligns with the growth potential identified in the Acima segment.
InvestingPro Tips highlight that Upbound's net income is expected to grow this year, which could be a sign of the profitability improvements Loop Capital is waiting for. Moreover, the stock's RSI suggests it is currently in oversold territory, potentially offering a favorable entry point for investors. It's worth noting that there are additional InvestingPro Tips available, which could provide further insights into Upbound's performance and outlook.
With a P/E ratio of 29.69 and a forward P/E ratio that dips into negative territory, the valuation metrics present a mixed picture. However, the gross profit margin stands at a healthy 49.66%, indicating that the company is maintaining a solid profitability ratio on its sales. These financial metrics, combined with the InvestingPro Tips, may help investors make a more informed decision regarding Upbound Group. For those seeking deeper analysis, more InvestingPro Tips can be found at https://www.investing.com/pro/UPBD.
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