On Wednesday, Citi made a significant adjustment to its price target on Qurate Retail Group (NASDAQ:QRTEA), reducing it to $0.50 from the previous target of $0.64, while maintaining a Neutral rating on the stock. Currently trading at $0.39, with a market capitalization of just $154 million, the stock has lost over 55% in the past year according to InvestingPro data. This revision follows the company's financial performance, which fell short of Citi's expectations.
Qurate Retail Group reported both revenue and Adjusted OIBDA (Operating Income Before Depreciation and Amortization) that did not meet the estimates set by Citi. InvestingPro data shows the company's revenue declined by 9.4% in the last twelve months to $10.24 billion, with a negative EPS of $0.70. In response to these results, the firm has updated its revenue forecasts for the years 2024 to 2026, which have been slightly altered.
The lowered price target reflects a new valuation model that takes into account the potential future of Qurate Retail Group. Citi's analysts have estimated approximately an 80% chance that Qurate will continue operating as a going concern, with the equity valued at $0.60, and a 20% chance of the company facing bankruptcy, in which case the equity would be worthless.
The reevaluation of Qurate's status and the new price target are indicative of the challenges the company faces, as well as the inherent uncertainties in its financial health and market performance. Citi's analysis suggests caution for investors considering the stock, given the revised risk assessment and potential outcomes for the company's future.
In other recent news, Qurate Retail Inc. experienced a challenging third quarter in 2024, with revenue falling short of expectations and a decrease in customer count. Despite a 19% increase in Adjusted OIBDA, the company reported a 4% decline in total TV minutes viewed and significant events that impacted consumer behavior, leading to a 1-2 percentage point reduction in revenue. Qurate Retail has been focusing on adapting to changing consumer habits and improving cost efficiencies, demonstrated by a nearly $400 million increase in free cash flow from December 2022 to September 2024.
In addition, the company is addressing NASDAQ compliance issues related to its stock price. The company's Cornerstone Brands faced a 12% revenue decline, prompting a transformation plan, while QVC International saw a 1% decrease in revenue with mixed results across regions. Qurate Retail is also adapting to cord-cutting trends and plans to target new audiences on social and streaming platforms.
The company aims for stable revenue and double-digit CAGR for adjusted OIBDA and free cash flow through 2024, with strategic developments to be detailed at the upcoming Investor Day. However, bearish highlights include a 6% year-over-year decrease in revenue across multiple categories and a decline in Adjusted OIBDA margin by 40 basis points. Despite these challenges, Qurate Retail remains optimistic about leveraging lessons from Project Athens for profitability and expects its focus on cash flow and cost efficiencies to position it well for future developments.
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