On Monday, Clorox Co . (NYSE:CLX) experienced a shift in market sentiment as DA Davidson changed its rating on the stock from Buy to Neutral, while maintaining a price target of $162.00. The adjustment comes after a notable recovery from a cyberattack that occurred in August 2023, with Clorox's market share returning nearly to its normal levels.
The company's stock has seen a significant uptick, rising by 36% over the past three months, outperforming the S&P 500's 17% increase during the same period. This surge in Clorox's share price aligns closely with the analyst's previous expectations set forth in their upgrade thesis on October 2nd.
Despite the positive developments and the increase in stock value, the analyst anticipates a deceleration in sales growth. Additionally, there are expectations of year-over-year gross margin contraction in the second half of fiscal year 2024, as the company has already realized the benefits of its pricing strategies.
In light of these factors, DA Davidson has revised its estimates upwards but also adjusted the target price-to-earnings (P/E) ratio downward to 27 times from the previous 32 times. This recalibration is based on the updated calendar year 2025 estimated earnings per share (EPS) of $6.02, which has been increased from the former estimate of $5.07.
The maintained price target of $162 reflects the new P/E ratio and the revised earnings expectations, underscoring the transition from what the analyst describes as "fundamental tailwinds" to "headwinds." This shift in dynamics has prompted the neutral stance on Clorox's stock as the market looks ahead.
InvestingPro Insights
Following DA Davidson's change in rating for Clorox Co. (NYSE:CLX) to Neutral, the company's financial metrics and market performance provide a broader context for investors. Clorox's market capitalization stands at a robust $19.4 billion, indicating a significant presence in the market. Despite a strong recovery from last year's cyberattack, Clorox's current P/E ratio is at a towering 224.75, which is considerably higher than the industry average, suggesting a premium valuation for the stock.
One of the key InvestingPro Tips for Clorox is the company's impressive track record of raising its dividend for 47 consecutive years, showcasing a commitment to returning value to shareholders. Moreover, Clorox has maintained dividend payments for an even longer period of 54 consecutive years, which might attract income-focused investors. This is particularly noteworthy in a market where consistent dividend payouts are highly valued.
Investors looking to delve deeper into Clorox's financial health and stock performance can benefit from the wealth of additional tips available on InvestingPro. Currently, there are 11 more InvestingPro Tips that provide insights into aspects such as net income growth expectations, debt levels, and stock valuation multiples. For those interested in a comprehensive analysis, an InvestingPro subscription is now on a special New Year sale with a discount of up to 50%. To enhance the deal further, use coupon code SFY24 to get an additional 10% off a 2-year InvestingPro+ subscription, or SFY241 to get an additional 10% off a 1-year InvestingPro+ subscription.
Clorox's recent performance metrics show a notable 25.6% return over the last three months, aligning with the surge in share price highlighted in the article. Additionally, the revenue growth for the last twelve months as of Q2 2024 stands at 3.47%, indicating a steady increase. These figures, coupled with the InvestingPro Tips, provide a comprehensive view of Clorox's recent financial performance and future potential, which investors can access by visiting https://www.investing.com/pro/CLX.
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