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Wednesday saw UBS analysts adjusting their financial outlook for Designer Brands Inc. (NYSE:DBI), as they lowered the company’s price target from $6.00 to $4.00, while maintaining a Neutral stock rating. The adjustment comes amid sustained top-line challenges for the company, particularly noticeable during the fourth quarter and extending into February. The stock has struggled significantly, with InvestingPro data showing a 65% decline over the past year and a 34% drop year-to-date.
Analysts at UBS expect Designer Brands to report a fourth-quarter earnings per share (EPS) that falls short by 6 cents, in contrast to the consensus estimates. Furthermore, they anticipate that the company will set its fiscal year 2025 guidance below the current market consensus. This projection is expected to trigger downward revisions of the Street’s $0.58 FY25 EPS forecast for Designer Brands. InvestingPro analysis reveals concerning trends, with the company’s Financial Health score rated as "WEAK" and two key warning signs: operating with significant debt burden and quickly burning through cash. InvestingPro subscribers have access to 13 additional insights about DBI’s financial condition.
Despite the anticipated shortfall in performance, UBS suggests that the market has already factored in a weaker report, which implies that there is limited downside risk associated with the upcoming earnings announcement. The analysts also mentioned that the prevailing weak sentiment towards Designer Brands is unlikely to shift significantly as a result of the fourth-quarter report.
Options market activity surrounding Designer Brands indicates expectations of a significant price movement, with a +/-16.3% change priced in for the event. This is notably higher than the historical average move of +/-10.9%. Nevertheless, UBS analysts project that the actual volatility will be less than what the options market is currently anticipating.
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