On Thursday, Truist Securities revised its price target for European Wax Center (NASDAQ:EWCZ), reducing it to $16.00 from the previous $17.00, while retaining a Buy rating on the stock.
The firm's analysis followed the company's first-quarter performance, which was reported to be largely consistent with revised estimates. European Wax Center also confirmed its full-year guidance for 2024.
The company experienced a slight decline in comparable sales, down 1.2%, but Truist Securities anticipates a significant uptick in sales throughout the year. This projection is based on expectations that new marketing and training initiatives will enhance productivity, echoing sentiments previously expressed during a non-deal roadshow (NDR).
Despite acknowledging the inherent risks in relying on such a rapid improvement in sales, Truist Securities expresses confidence in the management team's track record of achieving their forecasted results.
The firm highlights European Wax Center's asset-light business model, the potential for high single-digit unit growth with the opportunity to triple its expansion, and robust cash flow and profitability, with approximately 35% EBITDA margins.
In conclusion, Truist Securities advocates an aggressive buying stance for European Wax Center shares, citing the stock's current valuation as too low to remain static, despite the price target adjustment to $16.00 from $17.00.
InvestingPro Insights
European Wax Center (NASDAQ:EWCZ) has been navigating a dynamic market environment, and recent data from InvestingPro provides additional context to Truist Securities' revised price target. With a market capitalization of $695.25 million, the company is trading at a high earnings multiple, with a P/E ratio of 44.44, which is adjusted to 64.63 for the last twelve months as of Q4 2023. Despite this, analysts are optimistic about the company's profitability, as European Wax Center's gross profit margins remain impressive at 71.66%, reflecting efficient operations and strong pricing power.
InvestingPro Tips highlight that European Wax Center's net income is expected to grow this year, and the company is trading near its 52-week low, presenting a potential entry point for investors. The company's liquid assets also exceed its short-term obligations, indicating a solid financial position. However, it's worth noting that the company does not pay a dividend to shareholders, which may influence investment decisions for those seeking income-generating stocks.
For investors seeking a deeper analysis, there are additional InvestingPro Tips available at https://www.investing.com/pro/EWCZ. Using the coupon code PRONEWS24, readers can get an extra 10% off a yearly or biyearly Pro and Pro+ subscription to access a total of 11 InvestingPro Tips for European Wax Center, providing a comprehensive investment outlook.
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