Bullish indicating open at $55-$60, IPO prices at $37
On Tuesday, Mizuho Securities adjusted its outlook on shares of Leslie's (NASDAQ:LESL), a pool and spa supply company, by reducing the price target to $4 from the previous $6 while keeping a Neutral rating on the stock. This adjustment comes ahead of Leslie's scheduled release of full fiscal third-quarter results on August 7.
The revision of the price target follows Leslie's recent pre-announcement, which included a significant downward revision of its EBITDA guidance. Mizuho's analysts have updated their estimates in light of this information and after discussions with Leslie's senior management, including CEO Mike Egeck and CFO Scott Bowman.
The company's management has indicated that the current challenges, particularly in the equipment category, appear to be more cyclical than structural. The analysts believe that Leslie's valuation may be nearing a low point, potentially aligning with a 7-8x EV/EBITDA range, which is typical for struggling retailers. This valuation could correspond to a share price of $2-3.
Despite the potential for a valuation floor, the visibility into the company's sales and earnings remains limited. This uncertainty is compounded by a lack of immediate catalysts for the stock, as the next pool season is nearly a year away. As a result, Mizuho has reiterated its Neutral stance but has lowered the price target to reflect the recent developments and ongoing market uncertainties.
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