Canaccord cuts Waldencast price target to $5, maintains Buy

Thursday, Canaccord Genuity adjusted its outlook on Waldencast Acquisition Corp. (NASDAQ: WALD) stock, reducing the price target to $5.00 from the previous $6.00, while still holding a Buy rating on the shares. According to InvestingPro data, the stock has declined over 40% year-to-date and is currently trading below its Fair Value, suggesting potential upside opportunity. Two of twelve InvestingPro Tips highlight the company’s impressive gross profit margins and strong liquidity position. The firm’s analyst pointed to Waldencast’s first-quarter sales, which declined by 4.2% year-over-year, missing both company and analyst expectations of a slight decrease of around 0.2% to 0.3% and the company’s guidance of flat sales.

Waldencast’s adjusted EBITDA for the quarter was reported at $4.4 million, which translates to a 6.7% margin, falling short of the anticipated $11.8 million and $10.3 million by Canaccord and other analysts, respectively. The company maintains robust gross margins of 70%, according to InvestingPro data, though profitability remains a challenge with negative earnings over the last twelve months. Both of Waldencast’s brands, Milk Makeup and Obagi, experienced significant changes in their quarterly performance. Milk Makeup saw a 15.1% year-over-year decrease, compared to a 32% increase in the previous quarter and a 24% increase for the full year of 2024. Conversely, Obagi’s sales increased by 7.0%, which was less than expected due to supply chain issues resulting in stock shortages for key products.

Despite the weaker-than-expected first-quarter results, Waldencast’s management reaffirmed their full-year 2025 sales and EBITDA guidance. They expect sales to pick up throughout the year driven by new products and expanded distribution. The company believes that if sales targets are met, adjusted EBITDA margins will improve due to the strong brand margins of both Milk and Obagi.

Canaccord’s analyst remains optimistic about Waldencast’s long-term growth potential and margin strength. The analyst also noted that Waldencast has benefited from reduced nonrecurring expenses and a more flexible balance sheet following a refinancing in the previous quarter. The new price target of $5.00 is based on approximately 2 times the firm’s reduced fiscal year 2026 sales estimate, which is below the 4-5 times sales multiple of other high-growth beauty peers. The report concluded with an expectation that Waldencast will continue to face near-term challenges related to the supply chain and potential softening in consumer demand. InvestingPro analysis shows the company maintains a healthy current ratio of 1.35, indicating sufficient liquidity to manage near-term obligations despite these challenges. For deeper insights into Waldencast’s financial health and growth prospects, investors can access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers.

In other recent news, Waldencast Acquisition Corp reported its first-quarter 2025 earnings, revealing a larger-than-expected loss with an earnings per share (EPS) of -$0.07, missing the forecasted EPS of -$0.038. Revenue also fell short, coming in at $65.4 million against an expected $68.34 million, marking a 4.1% decrease year-over-year. Despite these setbacks, the company’s gross profit margin improved slightly, and management remains optimistic about future quarters, citing a strong product pipeline and improved stock availability. Waldencast has maintained its full-year outlook for 2025, suggesting confidence in meeting its annual targets through strategic initiatives, including product launches and expanded distribution partnerships.

Telsey Advisory Group recently adjusted its financial outlook for Waldencast, reducing the price target to $4.00 from $5.00 while maintaining an Outperform rating. The revision reflects caution due to increased global economic risks, but the Outperform rating indicates a continued positive outlook on Waldencast’s prospects. The company is also making strides in market expansion, notably with Milk Makeup’s entry into Ulta Beauty (NASDAQ:ULTA) stores. Challenges such as supply chain issues and market saturation in the prestige beauty category have been acknowledged, but Waldencast is actively working on improving its operational efficiencies.

Looking ahead, the company aims for mid-teens net revenue growth and an adjusted EBITDA margin in the mid-to-high teens. Waldencast plans to continue investing in marketing and brand expansion, despite potential cost increases due to tariffs. Management emphasizes the importance of strengthening the supply chain and broadening its brand footprint as key areas of focus for future growth.

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