On Wednesday, Piper Sandler adjusted its outlook on Allbirds Inc (NASDAQ:BIRD), a sustainable footwear and apparel company, by reducing its price target to $1 from the previous $1.60. The firm maintained a Neutral rating on the stock. The revision comes amidst concerns over the company's financial prospects and competitive position in the market.
"2024 guidance contemplates improving gross margin, yet more expense deleverage and a continuation of negative underlying demand for the brand," said the analyst from Piper Sandler.
He expressed skepticism about Allbirds' potential for growth and profitability. The analyst acknowledged that there could be opportunities for Allbirds to grow beyond 2024, particularly through product innovation and expanded wholesale distribution. However, confidence in the brand's appeal to consumers remains limited due to the intense competition in the industry.
Furthermore, the analyst pointed out operational changes at Allbirds, such as the shift of international markets to distributor models. Despite these changes, the analyst noted that forecasting a path to positive cash flow and adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) is challenging.
The departure of Allbirds' CEO, Joey Zwillinger, was also highlighted as a factor that does not inspire confidence in the company's direction. The executive's exit adds to the uncertainties surrounding Allbirds' future in a market where brand resonance and financial stability are crucial for success.
InvestingPro Insights
Piper Sandler's recent price target adjustment for Allbirds Inc (NASDAQ:BIRD) is underscored by the company's financial challenges, as reflected in the data and analysis available on InvestingPro. With a market capitalization of $142.15 million and a negative price-to-earnings (P/E) ratio of -1.19, Allbirds is grappling with profitability concerns. The last twelve months as of Q3 2023 have seen a revenue decline of 14.33%, indicating the company's struggle to maintain sales growth in a competitive market.
InvestingPro Tips suggest that Allbirds holds more cash than debt, which could offer some financial flexibility, but the company is quickly burning through its cash reserves. Analysts have revised their earnings estimates downwards for the upcoming period, and they do not expect the company to be profitable this year. The significant cash burn and anticipated sales decline are likely contributing factors to Piper Sandler's cautious stance.
Investors considering Allbirds as a potential opportunity should note that the stock has experienced high price volatility, with a six-month total return of -31.11% and a year-to-date total return of -24.08%. The current price is at 50.82% of its 52-week high, emphasizing the stock's recent underperformance. For those interested in a deeper dive into Allbirds' financial health and future prospects, InvestingPro offers additional insights. There are 13 more InvestingPro Tips available, which can be accessed with a subscription. Use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, and explore the full range of expert analysis and data.
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