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Tuesday, FAT Brands Inc. (NASDAQ: FAT) experienced a revision in its stock outlook as Loop Capital analysts adjusted the company’s price target down to $12 from $15, while still maintaining a Buy rating on the stock. According to InvestingPro data, the company currently trades at $3.35, with a market capitalization of approximately $59.5 million and carries a substantial debt burden of $1.57 billion.
The adjustment follows FAT Brands’ fourth-quarter financial results, which did not meet expectations. The company reported adjusted EBITDA of $14.4 million in the fourth quarter of 2024, falling short of Loop Capital’s estimate of $16.2 million and marking a decrease from the $27.0 million recorded in the same quarter of the previous year. InvestingPro analysis reveals the company’s concerning financial health score of 1.59 (labeled as WEAK), with multiple indicators suggesting rapid cash burn and profitability challenges. Get access to 10+ additional exclusive ProTips and comprehensive analysis through InvestingPro’s detailed research reports.
FAT Brands’ comparable sales saw a 1.6% decline in the fourth quarter, a figure slightly worse than the estimated 1.0% decrease. Furthermore, the company’s consolidated revenues were reported at $145.3 million, an 8.4% year-over-year drop. This decline was 1.4% when adjusting for an extra week included in the fourth quarter of 2023. The revenue figure also missed the forecast of $169.9 million set by the analysts. The company maintains a high EV/EBITDA multiple of 85.56x, suggesting a premium valuation despite operational challenges.
The revised price target of $12 is based on approximately 20 times Loop Capital’s adjusted 2025 EBITDA estimate. Despite the reduction in the price target, analysts at Loop Capital continue to recommend a Buy rating for FAT Brands, indicating a positive outlook on the stock’s potential performance. Based on InvestingPro’s Fair Value analysis, the stock appears to be trading near its fair value.
In other recent news, FAT Brands Inc. reported a decrease in revenue for the fourth quarter of 2024, with total revenue falling by 8.4% to $145.3 million. The company also recorded a net loss of $67.4 million, or $4.06 per diluted share, during this period. Despite these financial challenges, FAT Brands has announced plans to open over 100 new locations in 2025, indicating a focus on future growth. The company is also pursuing international expansion and co-branding strategies as part of its growth initiatives. Analysts have not provided any recent upgrades or downgrades for the company, but the focus remains on its strategic plans for expansion and debt reduction. Additionally, FAT Brands has spun off Twin Hospitality Group, now trading separately on NASDAQ, allowing shareholders to participate directly in the growth of the Twin Peaks brand. The company aims to reduce its debt by $75 million in 2025, with a focus on organic growth and strategic acquisitions.
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