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On Wednesday, Citi analysts, led by Asiya Merchant, adjusted the price target for Cricut , Inc. (NASDAQ:CRCT) shares, lowering it to $6.00 from the previous $6.50. Despite this reduction, the firm maintained a Neutral rating on the stock. According to InvestingPro data, the company maintains a strong financial health score of GOOD, with robust cash flows and a healthy balance sheet showing more cash than debt.
The revision follows Cricut’s announcement of its fourth-quarter results and the forecast for fiscal year 2025. According to Citi’s analysis, both revenue and operating income estimates for Cricut have been scaled back due to the company’s plans to ramp up investments. These investments aim to boost machine sales through more competitive pricing, hasten the development of new accessories and materials, improve user engagement, and strengthen intellectual property protection. While revenue showed a decline of 9.84% in the last twelve months, InvestingPro analysis reveals 10+ additional insights about the company’s performance and outlook, available to subscribers.
Cricut’s management has signaled that while the first half of 2025 might experience declines in top-line revenue, there is optimism for a rebound in growth during the second half of the year. This anticipated growth is supported by strong sell-through rates of recent product launches and ongoing discussions with retailers. Additionally, the company expects a slight year-over-year increase in platform revenues, bolstered by the momentum in its paid subscriber base.
The valuation model employed by Citi assigns Cricut a 9x enterprise value to earnings before interest, taxes, depreciation, and amortization (EV/EBITDA) multiple. This valuation is in line with other consumer-tech hardware companies, which typically range between 9x and 10x, compared to the 16x multiple seen with broader platform companies. Consequently, the target price has been adjusted to $6.00.
Citi’s analysts have labeled their rating as "Neutral High-Risk" and expressed that they are waiting for evidence of sustainable revenue and margin improvements before considering a potential expansion of the multiple and adopting a more positive stance on Cricut shares.
In other recent news, Cricut Inc. reported its fourth-quarter 2024 earnings, revealing an earnings per share of $0.06, which exceeded the forecasted $0.04. However, the company faced a revenue shortfall, reporting $209.3 million against the anticipated $231.16 million. Despite the revenue miss, Cricut’s gross margin improved to 44.9% from 42% a year earlier, and net income for the quarter was $11.9 million. The company also saw a 7% year-over-year increase in paid subscribers, reaching 2.96 million. Cricut’s international revenue showed a modest increase, contributing 25% to total revenue in the fourth quarter. Looking forward, Cricut anticipates a decline in total company sales for the first half of 2025, with an expected improvement in the second half. The company plans to bolster growth through new product launches and enhanced marketing strategies. Additionally, Cricut remains confident in its profitability and cash flow generation despite forecasting a 2-3 percentage point decline in operating income margin for 2025.
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