Tuesday, Mizuho initiated coverage on Floor & Decor Holdings, Inc. (NYSE:FND) with a Neutral rating and a price target (PT) of $115. The firm's analysis suggests a standstill in near-term category demand following a period of lackluster existing home sales. Mizuho anticipates a contraction in the company's top-line throughout 2024, which is expected to impact earnings, projecting them to decrease to $2.00 compared to a recent high of $2.76.
Mizuho acknowledges the potential of Floor & Decor's business model and its ability to capture market share through an expanding store base. However, the current valuation of the company's shares, which are trading near their peak at more than 45 times projected fiscal year 2025 earnings, has led the firm to advise caution. Mizuho suggests that investors might consider waiting for a more favorable entry point into the stock.
The report further elaborated that while the analyst appreciates the strengths of Floor & Decor's relatively young and growing business, the broader macroeconomic pressures are likely to continue affecting the home improvement sector. These pressures are expected to delay the rebound in trends for Floor & Decor compared to other companies in the home improvement space.
Mizuho's price target of $115 reflects a conservative stance on Floor & Decor's stock, implying a limited potential for upside from the current trading levels. The firm's neutral position is influenced by the expectation of a delayed recovery in the market's conditions, which could eventually lead to improved performance for Floor & Decor but not in the immediate future.
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