On Monday, TD Cowen initiated coverage on Waldencast Acquisition Corp. (NASDAQ: WALD) with a Hold rating and a price target of $4.30. The firm's analysis suggests that while the company's brands, Obagi and Milk, have a distinctive place in the beauty industry and potential to increase their market share, there are several factors that may limit the stock's movement in the near future.
According to InvestingPro data, the stock has shown significant volatility, trading at $3.89 with a beta of -0.51, indicating movement often contrary to broader market trends.
The analyst from TD Cowen pointed out that the beauty sector is normalizing after a period of exceptional growth, and as Waldencast faces tougher year-over-year comparisons following its strong performance in the financial year 2024, the stock may not witness significant price fluctuations.
The firm also noted concerns regarding Waldencast's near-term cash generation capabilities. These concerns appear justified, as InvestingPro analysis shows the company maintaining impressive gross profit margins of 69.71%, despite currently operating at a loss with negative free cash flow.
TD Cowen's coverage on Waldencast emphasizes the importance of monitoring certain aspects of the company's performance. These include the sustainability of Waldencast's recent outperformance, the growth of its free cash flow (FCF), and the overall health of its balance sheet. These factors are considered critical in evaluating the company's future financial stability and stock potential.
The analyst's comments reflect a cautious outlook on Waldencast's stock, acknowledging the company's unique positioning in the beauty space while also recognizing the challenges it may face. As the market adjusts and comparisons become more challenging, the firm's analysis suggests that investors could expect the stock to stay within a certain price range for the time being.
In other recent news, Waldencast Acquisition Corp. has seen a surge in sales growth, with both its Obagi Skincare and Milk Makeup brands reporting an over 20% increase. This strong performance has led DA Davidson to raise its price target for Waldencast from $7.25 to $7.50, while maintaining its Buy rating. The firm has projected a 28% year-over-year sales growth for the fourth quarter of 2024 and has increased its EBITDA forecast to $10.7 million.
DA Davidson also anticipates a 63% year-over-year EBITDA increase for Waldencast in 2024, reaching $40 million. This represents a 9% rise from their previous forecast. In line with this, Waldencast has confirmed its guidance for a mid-teens EBITDA margin for 2024, prompting DA Davidson to raise their margin estimate to 14.6%.
In addition to these financial developments, Waldencast has expanded its board with three new directors, Hind Sebti, Kelly Brookie, and Roberto Thompson Motta. Each brings a unique set of skills and expertise in beauty, financial, and consumer products sectors.
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