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On Wednesday, BofA Securities analyst revised the price target for Signet Jewelers shares (NYSE:SIG) shares, reducing it to $65 from the previous $95, while maintaining a Neutral rating on the stock.
The adjustment came after Signet reported disappointing holiday sales and lowered its fourth-quarter guidance. Currently trading at $58 with a P/E ratio of 5.3x, InvestingPro analysis suggests the stock is undervalued, despite recent market challenges.
Signet, known for its jewelry retail brands and generating $6.85 billion in revenue over the last twelve months, experienced a 2% decline in comparable sales during the holiday period, which spanned ten weeks and concluded on January 11th.
The company specifically noted underperformance in fashion gifting, especially in the 10 days leading up to Christmas. As a result, management adjusted its fourth-quarter comparable sales guidance to a decrease of 2.5% to 2%, a significant shift from its earlier forecast of flat to a 3% increase.
The company also updated its fourth-quarter sales expectations, now projecting a range of $2.320 billion to $2.335 billion, down from the previously anticipated $2.38 billion to $2.46 billion. Moreover, anticipated EBITDA was lowered to $381 million to $391 million, a 15% reduction from the midpoint of the prior estimate, which ranged from $441 million to $471 million.
In response to these developments, Hutchinson stated, "We are cutting our F26E EPS by 18% to $8.71 to reflect the weaker results and we are lowering our PO to $65, 4x EV/EBITDA (from $95, 5x prior) on lower estimates and a more challenged sales outlook."
The analyst expressed a cautious stance on the stock, suggesting that the current valuation appropriately reflects concerns regarding Signet's sales and margin trajectory going forward. InvestingPro subscribers can access 18 additional investment tips and a comprehensive Pro Research Report for deeper insights into Signet's valuation and growth prospects.
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