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On Thursday, DA Davidson analyst Michael Baker adjusted the price target for Destination XL Group (NASDAQ:DXLG) shares, lowering it to $2.00 from the previously set $2.50. Despite the reduction, the firm continues to advocate a Buy rating for the stock. According to InvestingPro data, the stock has experienced significant volatility, falling nearly 67% over the past year, with shares currently trading at $1.30.
Baker’s commentary highlighted that Destination XL Group has been experiencing a prolonged period of weak business performance, as their customers allocate funds to other priorities in a fluctuating and uncertain market. The company’s revenue declined 10.5% in the last twelve months, though it maintains a healthy gross profit margin of 46.5%. However, the analyst praised DXLG for its effective management of inventory and costs, along with the implementation of strategic initiatives that have mitigated financial downturns and begun to reveal slightly more positive trends.
The ongoing softness in DXLG’s business does not overshadow the company’s efforts to maintain control over the aspects it can influence. Baker notes that these efforts are beginning to show less negative trends, which is a positive sign amid challenging circumstances. InvestingPro analysis reveals that management has been aggressively buying back shares, and the company maintains strong liquidity with a current ratio of 1.45, indicating adequate coverage of short-term obligations.Discover 12+ additional exclusive insights about DXLG with an InvestingPro subscription, including detailed financial health scores and comprehensive valuation metrics.
The analyst also pointed out that DXLG is listed under the "Take Outs" category of DA Davidson’s S.T.A.M.P.E.D.E. product, referencing the proposed acquisition by Fund 1 Investments at $3 per share announced in December of the previous year. Although there have been no further updates regarding the buyout, the potential for this acquisition and the company’s competent management in a difficult market environment support the Buy rating.
Baker bases the new price target of $2.00 on a 4x multiple of the firm’s 2026 EBITDA estimate, reflecting a cautious yet optimistic outlook for Destination XL Group’s future financial performance.
In other recent news, Destination XL Group reported its first-quarter 2025 earnings, revealing a miss on both earnings per share (EPS) and revenue compared to forecasts. The company posted an EPS of -$0.04 against an expected $0.055, and revenue came in at $105.5 million, falling short of the anticipated $116.58 million. Net sales declined to $105.5 million from $115.5 million in the same quarter last year, largely due to a 9.4% decrease in comparable sales. Despite these results, the company remains debt-free and continues to focus on strategic initiatives such as new store openings and technology enhancements. Destination XL plans to open six new stores by the end of 2025. Analysts have not provided any recent upgrades or downgrades for the company’s stock. The company is also investing in new brand launches and technology innovations, emphasizing the potential of FITMAP technology to enhance the retail experience. These developments indicate Destination XL’s ongoing efforts to navigate through a challenging economic environment.
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