On Tuesday, DA Davidson showed confidence in the retail company Citi Trends (NASDAQ: CTRN) by increasing its price target from $20.00 to $28.00. The firm maintains a Buy rating on the stock, signaling a positive outlook on the company's future performance. The stock, currently trading at $23.80 with a market capitalization of $172.4 million, has shown significant momentum with an 8.41% gain over the past week, according to InvestingPro data.
The revision of the price target is attributed to the company's ongoing turnaround efforts, which have been particularly influenced by the appointment of a new CEO. Ken Seipel, who initially took the role of interim CEO in June, became the full-time CEO in mid-November.
Under his leadership, Citi Trends has experienced a notable improvement in sales and profitability, maintaining a healthy gross profit margin of 36.93%. This positive change has been the most significant since the challenges faced during the pandemic, suggesting a strong recovery for the retailer.
DA Davidson's analyst noted that the improved sales trends at Citi Trends are paving the way for the company to return to mid-single digit EBITDA margins in the coming years. This optimistic projection is supported by enhanced merchandising strategies and operational advancements, along with the potential for accelerated store growth.
The new price target of $28 is based on a forecasted 10x multiple of the company's projected 2026 EBITDA. DA Davidson's continued Buy rating and price target adjustment reflect the firm's belief in the effectiveness of the new management's strategies and Citi Trends' trajectory towards sustained financial health and expansion.
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