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On Tuesday, TD Cowen maintained a Hold rating on Yeti Holdings Inc. (NYSE: NYSE:YETI) but reduced the price target from $44.00 to $38.00. The adjustment reflects concerns about the U.S. business and a slowdown in domestic growth, with expectations for a potential reacceleration in the second half of 2025. This aligns with broader analyst sentiment, as InvestingPro data shows 12 analysts have recently revised their earnings expectations downward, with price targets ranging from $35 to $55. Despite these challenges, international markets such as Canada, Australia, the UK, and Germany continue to be strong for the company.
The firm noted that Yeti’s gross margin remains near an all-time high at 58.4%, according to InvestingPro data, and efforts to diversify sourcing away from China are expected to positively influence investor sentiment. The company maintains strong financial health with a current ratio of 2.18 and more cash than debt on its balance sheet. However, the competitive landscape in the U.S., particularly in the drinkware segment, poses a significant challenge for Yeti.
The new price target implies a valuation of approximately 13 times the firm’s projected earnings per share for fiscal year 2026, and around 7 times enterprise value to EBITDA. The current P/E ratio stands at 17.8x, with an EV/EBITDA of 9.6x, suggesting the stock is trading at a premium relative to near-term earnings growth potential. Based on InvestingPro’s comprehensive Fair Value analysis, which considers multiple valuation methods, the stock appears undervalued at current levels.
Since fiscal year 2021, Yeti has added $428 million in adjusted sales, which includes some acquisitions. However, the company has only modestly increased its adjusted EBIT by $14 million through fiscal year 2024, with its adjusted operating margin declining from over 20% to the mid-teens percentage range.
TD Cowen also highlighted that Yeti could see improvements in working capital efficiency, as inventory turnover remains low at 2.4 times. This could lead to more consistent free cash flow conversion. The analysts project $252 million in free cash flow and a notable 32% return on invested capital for fiscal year 2025.
In other recent news, Yeti Holdings Inc. reported its fourth-quarter 2024 earnings, surpassing expectations with an earnings per share of $1.00, compared to the forecasted $0.93. Despite a slight revenue miss, the company’s revenue stood at $546.5 million, just below the anticipated $552.31 million. The earnings report highlights a 9% increase in full-year sales to $1.84 billion and a 21% growth in EPS to $2.73, driven by strong international sales and strategic product launches. Meanwhile, Stifel analysts adjusted their price target for Yeti Holdings, reducing it to $40 from $45, while maintaining a Hold rating. This revision follows Yeti’s first holiday quarter earnings beat since 2021, with a significant 27% growth in international markets. Piper Sandler continues to express confidence in Yeti by maintaining an Overweight rating and a $52 price target, citing potential growth in new product categories and international expansion. The company remains focused on long-term growth strategies, including product innovation and further market penetration.
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