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Investment firm DA Davidson increased its price target for shares of Waldencast Acquisition Corp. (NASDAQ: WALD) to $7.25, up from the previous target of $6.50.
The adjustment follows Waldencast's reported second-quarter sales that exceeded expectations, despite an EBITDA miss which the firm attributes to an underestimation of the typical seasonal decline in second-quarter sales.
Waldencast, which operates in the beauty and wellness sector, saw significant sales growth in its Obagi and Milk brands.
The growth could have been stronger if not for product availability issues that failed to meet the high demand.
DA Davidson notes that Waldencast is forecasting an acceleration in sales growth for the second half of 2024 and maintains its expectation for a mid-teens EBITDA margin for the year, a substantial increase from the 11.2% margin in 2023.
In response to these developments, DA Davidson has revised its 2024 sales growth estimate for Waldencast to 24% year-over-year, up from the initially projected 15%. The firm has also increased its EBITDA estimates by 7%.
The new price target of $7.25 is based on a 27-times multiple of the firm's revised 2025 EBITDA projection of $50 million, which is an increase from the prior estimate of $46 million.
InvestingPro Insights
With Waldencast Acquisition Corp. (NASDAQ: WALD) catching the eye of investment firm DA Davidson, the market is paying close attention to its performance metrics. According to InvestingPro data, Waldencast has a market capitalization of $369.21 million and a notably high gross profit margin of 69.71% for the last twelve months as of Q2 2024. This margin is indicative of the company's efficiency in managing its production costs relative to its sales—a factor that may have contributed to DA Davidson's positive outlook. Despite a challenging period reflected by a 12.74% revenue decline over the same period, the company has demonstrated a quarterly revenue growth of 20.34% in Q2 2024, signaling a potential turnaround.
InvestingPro Tips highlight that analysts expect sales growth in the current year, which aligns with DA Davidson's forecast for an acceleration in sales growth in the second half of 2024. Additionally, Waldencast's impressive gross profit margins are likely a key factor in DA Davidson's revised EBITDA estimates. However, it's worth noting that the company is not expected to be profitable this year, and the stock price has seen a significant drop of over 60% in the past six months. For investors considering this stock, these contrasting points underscore the importance of a nuanced approach to Waldencast's future potential.
For those looking for a deeper dive into Waldencast's financials and market performance, InvestingPro offers a comprehensive set of additional tips, providing a broader context for informed investment decisions. Explore the full range of insights at https://www.investing.com/pro/WALD.
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