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On Thursday, Telsey Advisory Group adjusted its financial outlook for Waldencast Acquisition Corp. (NASDAQ:WALD), reducing the price target to $4.00 from the previous $5.00 while maintaining an Outperform rating on the company’s stock. According to InvestingPro data, the stock has declined over 40% year-to-date, currently trading at $2.40, significantly below its 52-week high of $5.21. The modification follows a quarter that presented challenges for Waldencast, particularly for its Milk Makeup brand which struggled with difficult year-over-year comparisons and stockouts of key products. These factors contributed to sales and adjusted EBITDA falling below consensus for both individual brands and on a consolidated basis.
Despite the lower than expected performance in the first quarter, the company’s gross margin outperformed predictions, with InvestingPro reporting an impressive 70.01% gross profit margin in the last twelve months. Milk Makeup’s difficulties were anticipated due to the prior year’s successful Jelly Tint launch, and supply chain issues impacted Obagi, another brand under Waldencast’s umbrella. Management remains optimistic about the second quarter, expecting to start reaping the benefits of a robust product pipeline and improved stock availability.
Waldencast has decided to uphold its full-year outlook for 2025, suggesting confidence in the company’s ability to meet its annual targets. This stance is supported by several strategic initiatives, including the launch of Milk’s Hydro Grip Gel Tint, the brand’s debut in ULTA Beauty stores, and anticipated improvements in Obagi’s fulfillment processes. Obagi continues to be recognized as a leading brand in professional skincare, while Milk Makeup is gaining traction with Gen Z consumers, as demonstrated by its successful product launches and recent expansion into 600 Ulta locations.
The revised price target of $4 by Telsey reflects caution due to increased risks in the global economic environment. The new target is based on an 11.0x multiple on the firm’s two-year forward EBITDA estimate of $62.5 million. This valuation represents a modest decrease from Waldencast’s current near-term multiple of 10.2x and is below the one-year average multiple of 13.5x. Despite the first-quarter performance and adjustments to the price target, Telsey’s Outperform rating indicates a continued positive outlook on Waldencast’s prospects. InvestingPro analysis suggests the stock is currently undervalued, with additional metrics showing the company trading at a low Price/Book multiple of 0.41. Subscribers can access 12 more exclusive ProTips and a comprehensive analysis of Waldencast’s financial health and growth potential.
In other recent news, Waldencast Acquisition Corp reported its first-quarter 2025 earnings, revealing a larger-than-expected loss. The company disclosed an earnings per share (EPS) of -$0.07, which fell short of the forecasted EPS of -$0.038. Revenue also missed expectations, coming in at $65.4 million against an anticipated $68.34 million. Despite these financial challenges, Waldencast expanded its product lines and partnerships, notably entering Ulta Beauty (NASDAQ:ULTA) stores. The company is focusing on supply chain restructuring to enhance operational efficiency and support long-term growth. Analysts from firms like Alliance Global Partners (NYSE:GLP) and Jefferies raised questions about the company’s supply chain improvements and the impact of its Ulta Beauty launch. Waldencast aims for mid-teens net revenue growth and an adjusted EBITDA margin in the mid-to-high teens for the year. The company plans to continue investing in marketing and brand expansion, despite expecting a low single-digit increase in the cost of goods due to tariffs.
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