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On Monday, Citi analyst Kelly Crago updated the financial outlook for European Wax Center (NASDAQ:EWCZ), increasing the price target to $6.00 from the previous $4.50. The company’s shares maintain a Neutral rating despite the change. According to InvestingPro data, analyst targets for EWCZ range from $4.00 to $15.00, with four analysts recently revising their earnings expectations upward. The adjustment follows European Wax Center’s first-quarter performance, which outperformed consensus expectations due to slightly stronger sales.
The company reported system-wide comparable sales growth of 0.7%, surpassing the consensus forecast of flat growth. This uptick suggests a stabilization of the business, countering fourth-quarter uncertainties and prevailing macroeconomic concerns. The company maintains impressive gross profit margins of 74% and shows strong financial health with a current ratio of 2.71, indicating solid liquidity management. The new management team’s efforts to revitalize comparable store growth and gain a clearer picture of franchise-level profitability were highlighted. Their revised marketing strategies aim to attract new customers to their centers.
Crago noted that the first-quarter results indicate management’s initiatives have at least stabilized revenue. The reaffirmation of the fiscal year 2025 sales, EBITDA, and store guidance by management reflects some confidence in the health of their franchisees. Moreover, management has signaled the end of fiscal year 2026 as the target for resuming net store growth.
The higher end of the fiscal year 2025 guidance suggests an anticipated improvement in the second half of the year, driven by new company initiatives. However, Crago pointed out that visibility into the success of these strategies remains limited. The expectation is that the stock will stay within a certain price range until management can demonstrate that their strategies are effectively improving comparable store performance. This projection implies a balanced risk/reward at the current stock price levels. InvestingPro analysis suggests the stock may be undervalued based on its Fair Value calculation, with additional insights available in the comprehensive Pro Research Report, which offers deep-dive analysis of EWCZ among 1,400+ US stocks.
In other recent news, European Wax Center reported its financial results for the first quarter of 2025, revealing modest growth amidst a stable consumer environment. The company saw a 2.1% increase in system-wide sales, reaching $225.9 million, while adjusted EBITDA rose by 7.2% to $18.8 million with a margin of 36.5%. However, total revenue experienced a slight decline to $51.4 million. European Wax Center is aiming for a return to net unit growth by the end of fiscal 2026, planning to enhance marketing strategies and franchisee support. The company projects full-year system-wide sales to be between $940 million and $960 million, with adjusted EBITDA expected to range from $69 million to $71 million. Additionally, the company anticipates 10 to 12 gross openings and 40 to 60 center closures. Analyst firm Telsey Advisory Group inquired about the rationale behind center closures and potential sales transfer during the earnings call, highlighting ongoing challenges and opportunities for the company.
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