On Thursday, Loop Capital adjusted its outlook on Katapult Holdings (NASDAQ:KPLT) shares, decreasing the price target to $9.00 from the previous $15.00, while sustaining a Hold rating on the company's shares. The revision follows Katapult's third-quarter performance, which did not meet expectations.
Katapult Holdings, which has seen its gross originations grow at a low- to mid-single-digit percentage rate for the third consecutive quarter, fell short of the mid-teens percentage increase experienced last year. This outcome has led to the revised assessment by Loop Capital.
The firm expressed concerns over the trajectory of Katapult's business growth. The analyst noted, "We were disappointed by Katapult's 3Q 2024 gross originations shortfall," highlighting a pattern of underwhelming growth compared to the previous year's more robust figures.
Loop Capital also expressed skepticism regarding the company's earlier forecasts. "We were skeptical of management's prior guidance of a significant sequential acceleration in 2H 2024 gross originations," the analyst stated, indicating doubt about the company's ability to meet its own growth targets.
The updated guidance for the fourth quarter of 2024 provided by Katapult has further impacted the firm's stance on the company's stock. Loop Capital believes that the recent performance and the new forecast have negatively affected the management's credibility.
By setting a lower price target, Loop Capital is adjusting its expectations in light of the recent developments and the company's inability to meet prior growth predictions. The Hold rating remains unchanged, reflecting a neutral stance on the stock's potential performance.
In other recent news, Katapult Holdings has reported its third-quarter earnings for 2024, showcasing an eighth consecutive quarter of growth in gross originations and a year-over-year increase of 37% in origination excluding Wayfair (NYSE:W). The company's gross originations for Q3 2024 were $51.2 million, a 3.3% increase, with revenue growing by 10% to $60.3 million.
Adjusted EBITDA was positive at $600,000, with a year-to-date total of $5.8 million. The full-year outlook for gross originations is adjusted to a growth of 2% to 4%, with revenue expected to grow at least 10%.
Katapult is also finalizing a new credit facility to replace the current one and has recorded a reserve for a DCA settlement. Despite a significant decline in application volume from Wayfair, the company has shown strong growth in the automotive category, increasing over 25% in Q3.
A patent infringement lawsuit is being addressed, with the company intending to defend itself vigorously. These are among the recent developments in the company's operations.
InvestingPro Insights
Recent data from InvestingPro sheds additional light on Katapult Holdings' financial situation, aligning with Loop Capital's cautious stance. The company's market capitalization stands at a modest $31.1 million, reflecting investor skepticism about its growth prospects. This is further underscored by InvestingPro Tips, which indicate that Katapult is "quickly burning through cash" and "suffers from weak gross profit margins."
The stock's recent performance has been particularly concerning, with InvestingPro data showing a 24.8% price decline over the past month and a substantial 59.35% drop in the last three months. These figures corroborate Loop Capital's decision to lower the price target and maintain a Hold rating.
Despite these challenges, it's worth noting that Katapult's revenue for the last twelve months as of Q3 2024 was $241.35 million, with a revenue growth of 14.54% over the same period. However, this growth rate appears to be decelerating, as evidenced by the quarterly revenue growth of 9.15% in Q3 2024.
For investors seeking a more comprehensive analysis, InvestingPro offers 13 additional tips on Katapult Holdings, providing a deeper understanding of the company's financial health and market position.
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