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Malibu Boats target cut to $35 on inventory, dealer issues

EditorAhmed Abdulazez Abdulkadir
Published 07/10/2024, 08:05 AM

On Wednesday, B.Riley revised its stance on Malibu Boats (NASDAQ:MBUU), reducing the price target from $39.00 to $35.00, yet retaining a Neutral rating on the shares. The firm's decision is based on several key concerns they have identified which could potentially affect the company's performance in the early fiscal year 2025.

According to B.Riley, Malibu Boats is facing challenges that include elevated inventory levels and the repercussions of a bankrupt dealer group. These issues are anticipated to influence wholesale demand and profit margins.

Additionally, the arrival of a new CEO, who has adopted a cautious approach, is another factor that has been taken into consideration for the adjustment of the price target.

The firm's analyst pointed out that the combination of these factors necessitates a revision of estimates for Malibu Boats. The higher promotional activity that is expected to take place is also seen as a potential pressure point for the company's financial outlook.

Malibu Boats' current situation, with the revised price target and maintained Neutral rating, reflects the firm's assessment of the company's near-term prospects. The new price target of $35.00 signifies a more conservative valuation of the company's shares in light of the challenges outlined.

In other recent news, Malibu Boats has experienced significant shifts in financial performance and market outlook. The company reported a substantial decrease in net sales, down 46% to $203.4 million, with adjusted EBITDA falling by 69% to $24.4 million.

This decline was attributed to a weakened retail environment and softer demand, leading to increased promotional spending and decreased production. Amid these challenges, Truist Securities downgraded Malibu Boats from a "Buy" to a "Hold" rating, citing concerns such as the ongoing Tommy’s situation and recent executive turnover that could obscure the company's outlook for 2024.

Despite the downturn, Malibu Boats remains optimistic about its future. The company plans to reduce inventories during the peak selling season and maintain a strong cash position and debt-free balance sheet. Malibu Boats also anticipates a substantial improvement in financial performance in the next fiscal year, with revenue forecasts of approximately $1.3 billion once the industry recovers.

Alongside these developments, KeyBanc and Baird both adjusted their outlooks on Malibu Boats. KeyBanc cut the stock price target to $38 from $50 but maintained an Overweight rating, while Baird reduced its shares target to $40 from the previous $50, also retaining an Outperform rating. Both firms attributed their adjustments to the company's lowered financial guidance for fiscal year 2024 and the challenging market conditions.

InvestingPro Insights

As Malibu Boats (NASDAQ:MBUU) navigates through its operational and leadership challenges, InvestingPro data underscores the financial landscape of the company. With a market capitalization of $633.63 million and a Price to Earnings (P/E) ratio of -11.61, investors may find the valuation metrics noteworthy. The adjusted P/E ratio for the last twelve months as of Q3 2024 is 6.63, suggesting a potential undervaluation if one considers future earnings projections. Additionally, the company's price is currently near its 52-week low, trading at $30.52, which may present a buying opportunity for value investors.

Among the InvestingPro Tips, two are particularly pertinent to the article's context. The first is that Malibu Boats holds more cash than debt on its balance sheet, which may provide some financial flexibility amidst the challenges mentioned by B.Riley. The second tip is that the stock is currently in oversold territory according to the Relative Strength Index (RSI), indicating that the recent price decline might be overextended and could rebound. For investors seeking a deeper dive into the company's prospects, InvestingPro offers additional insights, including more tips that can be found at: https://www.investing.com/pro/MBUU. To access these, consider using the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription.

With 14 additional InvestingPro Tips available, investors can gain a comprehensive understanding of Malibu Boats' financial health and market position. As the company approaches its next earnings date on August 29, 2024, these insights could prove valuable in assessing how well Malibu Boats is positioned to overcome its current obstacles and capitalize on potential growth opportunities.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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