Telsey cuts AKA Brands price target to $9, keeps Market Perform

On Tuesday, Telsey Advisory Group adjusted its outlook on AKA Brands Holding Corp (NYSE:AKA), reducing the company’s price target to $9.00 from the previous $18.00, while maintaining a Market Perform rating. The revision follows AKA Brands’ fourth-quarter earnings, which matched the positive pre-announcement made in mid-January. Sales figures were consistent with the preliminary report, and adjusted EBITDA reached the upper end of the expected range. According to InvestingPro data, the company achieved 5.21% revenue growth with a healthy gross margin of 56.99%, though two analysts have recently revised their earnings expectations downward.

The company’s first-quarter guidance for 2025 was notably more optimistic than the cautious projections offered by many of its retail sector peers, surpassing subdued market expectations for both revenue and EBITDA. For the full year 2025, the consensus estimates were at the low end of AKA Brands’ sales guidance, while adjusted EBITDA forecasts were within the range provided by the company.

AKA Brands is now concentrating on growth strategies, such as enhancing brand recognition, attracting new customers, and expanding its omnichannel presence through new store openings and wholesale partnerships. These efforts aim to leverage product innovation and a growing active customer base to drive the company back to growth.

Despite these positive developments, Telsey noted that the long-term profitability outlook for AKA Brands remains unclear. The competitive retail landscape, challenges in the Australian market, and broader economic uncertainties contribute to the risks facing the company. The new price target of $9 reflects a 0.29x multiple on Telsey’s two-year forward sales forecast of $635 million, which aligns with the three-year trough multiple and is a reduction from the recent multiple of 0.39x. Trading near its 52-week low of $7.08, InvestingPro analysis suggests the stock is slightly undervalued at current levels, with over 14 additional real-time ProTips available for subscribers seeking deeper insights into the company’s financial health and market position.

In other recent news, AKA Brands Holding Corp reported strong financial results for the fourth quarter of 2024, with U.S. net sales increasing by 21.6%. The company’s full-year net sales reached $575 million, marking a 5.2% increase compared to the previous year, while adjusted EBITDA saw significant growth of 69%, reaching $23.3 million. The company has set a net sales forecast of $600-$610 million for 2025, indicating an expected growth rate of 4-6%. AKA Brands plans to open seven new Princess Polly stores in 2025 as part of its expansion strategy in the U.S. market. The company has also been focusing on expanding its wholesale presence, with Princess Polly and Petal and Pup launching across Nordstrom (NYSE:JWN)’s store fleet. Analysts from firms like Lake Street Capital and KeyBanc Capital Markets inquired about the company’s growth strategies and potential impacts of tariffs, to which executives expressed confidence in navigating these challenges. The company remains committed to enhancing its omni-channel presence and leveraging its direct-to-consumer model to drive future growth.

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