UBS cuts Children’s Place stock target to $9, maintains neutral

On Tuesday, UBS analysts, led by Jay Sole, revised the price target for The Children’s Place (NASDAQ:PLCE) stock to $9.00 from the previous $11.00 while maintaining a Neutral rating. The adjustment follows observations that sales trends for the retailer have weakened since its fourth-quarter pre-release on December 17th. The Children’s Place stock has experienced a significant decline, dropping 31% since the pre-release, compared to the S&P 500’s 3% decrease in the same timeframe.

UBS anticipates a slight earnings miss for The Children’s Place in the fourth quarter, projecting earnings per share (EPS) of $0.20 versus the consensus estimate of $0.24. InvestingPro analysis reveals the company has not been profitable over the last twelve months, though analysts predict a return to profitability this year. The firm suggests that the potential miss may not shock the market due to prevailing sentiments. Analysts highlight that the upcoming fourth-quarter EPS results will be crucial in driving the stock, especially since the company is unlikely to provide guidance or host an earnings call.

The report also outlines potential risks and opportunities for the retailer. A bearish comment on the first-quarter trends of 2025 could pose a significant downside risk. On the other hand, if The Children’s Place reports greater than expected savings in selling, general, and administrative (SG&A) costs, fourth-quarter EPS could surpass sell-side estimates, presenting an upside risk.

The options market is anticipating a high volatility event, pricing in an approximate 15.6% stock price fluctuation in response to the earnings report, which is higher than the historical average movement of 10.7%. This aligns with InvestingPro data showing the stock generally trades with high price volatility. UBS agrees with the options market’s assessment of the potential for high volatility surrounding the announcement. For deeper insights into The Children’s Place’s financial health and 12+ additional exclusive ProTips, consider subscribing to InvestingPro.

In other recent news, The Children’s Place, Inc. has completed an oversubscribed rights offering, raising approximately $29.8 million in gross cash proceeds. The offering allowed existing shareholders to purchase up to 9,230,769 shares of common stock at $9.75 per share. This initiative saw significant participation, with total demand reaching 12,117,812 shares, indicating strong interest from rights holders. The company plans to use 20% of the proceeds for general corporate purposes and the remaining 80% to prepay revolving credit facility debts. Additionally, Mithaq Capital SPC and Snowball Compounding Ltd., two major shareholders, fully exercised their basic subscription rights, with Mithaq also seeking additional shares through the over-subscription privilege. In another development, The Children’s Place appointed Rhys Summerton to its Board of Directors and Audit Committee, bringing extensive financial expertise to the company. Summerton’s background includes roles at Milkwood Capital and Citigroup (NYSE:C), enhancing the company’s governance and strategic decision-making capabilities. These recent developments highlight The Children’s Place’s strategic initiatives to strengthen its financial position and governance.

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