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On Thursday, Raymond (NSE:RYMD) James analyst Bobby Griffin adjusted the price target for PROG Holdings (NYSE:PRG) stock, reducing it to $40.00 from the previous target of $48.00. Despite the change, the firm maintained its Outperform rating on the company’s shares. According to InvestingPro data, the stock currently trades at $30.58, having declined nearly 30% in the past week, suggesting significant potential upside to the new target price.
Griffin’s commentary highlighted that PROG Holdings’ fourth-quarter results for 2024 exceeded expectations, with revenues and gross margins modestly surpassing projections. The company achieved a robust gross profit margin of 34.2% and generated $2.46 billion in revenue for the last twelve months. The quarter’s performance aligned with the higher end of the management’s guidance. However, the 2025 outlook presented by the company was not as optimistic, influenced by the bankruptcy of Big Lots (NYSE:BIG), increased marketing investments, and some consumer stress indicated by a slight uptick in delinquencies.
The analyst expressed surprise at the extent of the stock’s decline, approximately 28%, following the guidance update. The decline was seen as disproportionate to the mid-point of the company’s 2025 EBITDA guidance, which was about 6% below the consensus, even when accounting for all the challenges faced.
Griffin also pointed out the strengths of PROG Holdings, including the company’s active door growth and the expectation of high single-digit growth in 1Q Gross Merchandise Volume (GMV), excluding the impact of Big Lots. The firm’s balance sheet and cash flow generation remain robust, providing management with the opportunity for additional share repurchases, which have not been factored into the guidance.
In conclusion, the analyst noted that with the Big Lots issue now behind them, and considering the continued year-over-year growth of core GMV (excluding Big Lots), the risk/reward profile for PROG Holdings was compelling. The current trading price is approximately 9 times Raymond James’ 2025 earnings per share estimate for the company, which is below the three-year median of around 10 times and one-year median of around 12 times. InvestingPro analysis indicates the stock is currently undervalued, with a "GOOD" overall financial health score. For deeper insights into PROG Holdings’ valuation and 12 additional ProTips, including detailed financial analysis and growth prospects, investors can access the comprehensive Pro Research Report available on InvestingPro.
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