On Tuesday, Lake Street Capital Markets adjusted its stance on Vista Outdoor (NYSE:VSTO), shifting the rating from Buy to Hold, while increasing the price target to $37 from the previous $33. The decision to downgrade reflects the firm's view on the share valuation and its growth potential, indicating limited upside from its current market price.
The revised price target is based on a more optimistic view of the company's financial health, particularly its robust cash flow and success in reducing debt. Lake Street Capital Markets anticipates these improvements to play a significant role in Vista Outdoor's valuation, justifying the higher price target despite the downgrade.
In setting the new price target, Lake Street Capital Markets applied a 6.0x EV/EBITDA multiple to Vista Outdoor's forecasted FY2025 adjusted EBITDA of $463 million. This calculation underpins the firm's revised valuation and outlook for the company's stock performance in the coming months.
The change in rating and price target comes amidst an assessment of the company's financial trajectory and market position. While the increase in price target suggests a positive outlook on Vista Outdoor's financial fundamentals, the downgrade to Hold indicates a more cautious perspective on the stock's near-term investment potential.
Lake Street Capital Markets' update on Vista Outdoor emphasizes the balance between the company's strong financials and the market's current pricing, guiding investors on the expected performance over the next several months. The firm's analysis serves as a key indicator for market watchers and investors considering Vista Outdoor's stock.
InvestingPro Insights
With a recent change in rating from Lake Street Capital Markets, Vista Outdoor (NYSE:VSTO) investors may be curious about additional insights that could inform their investment decisions. According to InvestingPro data, Vista Outdoor currently holds a market capitalization of approximately $2.03 billion. Despite a challenging revenue growth trend in the last twelve months as of Q4 2024, with a decrease of 10.84%, the company's gross profit margin remains solid at 31.28%. The price target increase by Lake Street Capital Markets aligns with Vista Outdoor's fair value estimates, which range from $38 to an InvestingPro fair value of $44.06.
InvestingPro Tips reveal a mix of optimism and caution for Vista Outdoor. The company is anticipated to become profitable this year, which could be a significant turnaround given that it was not profitable over the last twelve months. Additionally, Vista Outdoor's liquid assets surpass short-term obligations, indicating a strong liquidity position. However, investors should note that three analysts have revised their earnings expectations downwards for the upcoming period, which may impact future performance.
For those looking to delve deeper into Vista Outdoor's potential, InvestingPro offers a wealth of additional tips—11 in total for this company alone. Interested investors can use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, providing access to these valuable insights and more.
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