Citi maintains neutral stance on Solo Brands stock

On Monday, Citi reaffirmed its Neutral rating on Solo Brands (NYSE: DTC), with a steady price target of $1.35. The firm's assessment was based on a review of web traffic data, which is considered an indicator of sales trends for the company's online platforms, solostove.com and chubbiesshorts.com.

The analysis of July's web traffic, as compiled by Citi's Innovation Lab, indicated a year-over-year decline in average unique visitors to Solo Stove's website by 24.7%, which was consistent with the second quarter of 2024. However, the total visits in July saw a more significant drop of 56.0% compared to the previous year.

For Chubbies, the brand also experienced a decrease in both average unique visitors and total visits in July. This decline was noted to be more pronounced than the trends observed in June and throughout the second quarter of 2024.

The data suggests that both of Solo Brands' key online outlets have been facing challenges in attracting web traffic. This downward trend has been evident in the year-over-year comparisons for the month of July and reflects broader issues that were already emerging in the previous quarter.

Citi's neutral position on Solo Brands remains unchanged, with the $1.35 price target suggesting that the firm is taking a cautious approach to the company's stock valuation in light of the observed web traffic trends.

In other recent news, Solo Brands has reported mixed financial results, with a net loss of $4 million for the second quarter of fiscal 2024, alongside an adjusted net income of $6.1 million. There was a slight decline in direct-to-consumer sales, counterbalanced by a growth in wholesale revenues.

Despite the net loss, the company anticipates a challenging third quarter, but expects a strong fourth quarter supported by marketing campaigns and product launches. Solo Brands' projections for fiscal 2024 revenue range between $470 million and $490 million.

In conjunction with the financial results, Solo Brands announced the upcoming resignation of board member Marc Randolph, effective August 31, 2024. The company expressed gratitude for Mr. Randolph's contributions and is actively seeking a replacement. This resignation is due to personal reasons and not associated with any disagreements with the company's operations, policies, or practices.

Following these developments, Citi has maintained a neutral rating for Solo Brands, but lowered the company's stock price target from $2.50 to $1.35. This adjustment comes after Solo Brands reduced its full-year 2024 guidance due to weaker trends in the third quarter and broader economic pressures. Despite these challenges, Solo Brands remains focused on long-term growth and market reinvention, with plans to expand product categories and innovate in 2025.

InvestingPro Insights

Amidst the challenges highlighted by Citi in web traffic trends for Solo Brands, the company also presents a complex financial picture. According to real-time data from InvestingPro, Solo Brands has a market cap of $131.01 million, with a notably high gross profit margin of 60.48% over the last twelve months as of Q2 2024. Despite this strength, the company has experienced a revenue decline of 5.02% during the same period, reflecting the broader issues indicated by the web traffic analysis.

InvestingPro Tips suggest that management's strategy includes aggressive share buybacks, which could indicate confidence in the company's future prospects or an attempt to bolster stock price. However, the company does not pay dividends, which may influence investor decisions. Analysts have revised their earnings expectations downwards for the upcoming period, signaling caution that aligns with Citi's neutral rating.

For investors seeking a deeper dive into Solo Brands' financial health and future outlook, InvestingPro provides additional tips and metrics. Currently, there are 16 more InvestingPro Tips available that offer insights into the company's debt burden, profitability, and stock price volatility, among other factors. These metrics can be critical for making informed investment decisions in the context of the company's recent performance and market trends.

The current price of Solo Brands stands at $1.43, with the stock having experienced significant volatility, including a notable return of 12.6% over the last week. However, the longer-term view shows a decline, with the price having fallen 77.01% over the last year. This volatility and performance history could be essential considerations for potential investors.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.