On Thursday, Piper Sandler adjusted its stock price target for European Wax Center (NASDAQ:EWCZ), decreasing it to $12.00 from the previous figure of $15.00. Despite this change, the firm retained an Overweight rating on the company's stock.
The revision follows a period of mixed sentiment towards European Wax Center, as reflected in the company's share price movements over recent months. The analyst cited concerns about irregular customer visit patterns and the drive among franchisees to increase Average Unit Volume (AUV) as key factors contributing to the negative same-store sales reported in Q1.
European Wax Center's management has recognized the need for patience with the initiatives being implemented, which are expected to yield results over time. However, the uncertainty during this transitional phase has led to some investor apprehension. Looking ahead to Q2, the analyst suggested that if the company fails to deliver low single-digit same-store sales (LSD SSS) and at least maintain its guidance, there could be further risk to the stock's value.
Nevertheless, there are positive indicators, such as acceptable visitation trends and the impact of Operation Elevate, which is anticipated to improve unit economics as it expands its reach. Additionally, the rollout of laser treatments and the early success of the new 3+1 Wax Pass offerings provide some optimism. The analyst believes that while a guidance increase may not be necessary for the stock to recover from its Q2 earnings report, a reassured confidence in the current outlook is essential.
In other recent news, European Wax Center has been the subject of several analyst adjustments following its first-quarter performance. Truist Securities lowered its price target for the company from $17.00 to $16.00, but maintained its Buy rating, citing confidence in the management team and the company's robust cash flow and profitability.
Meanwhile, Baird also reduced its price target, from $15.00 to $13.00, keeping a Neutral rating on the stock. BofA Securities followed suit, revising its price target to $16.00 from $19.00, but also retaining a Buy rating.
European Wax Center's first-quarter revenues reached $51.9 million, slightly exceeding consensus estimates. Still, the company experienced a 1.2% dip in comparable store sales due to factors such as adverse weather conditions. Despite this, the company has upheld its full-year 2024 guidance, anticipating a gradual improvement in sales throughout the year.
In addition to these adjustments, the company announced its strategic growth plans, which include the opening of seven new centers and piloting a laser hair removal service. These are the latest developments for European Wax Center, and investors are closely monitoring the company's performance and growth strategies.
InvestingPro Insights
As Piper Sandler recalibrates its price target for European Wax Center, real-time data and insights from InvestingPro provide a broader context for investors. With a market capitalization of $569.98 million and a P/E ratio of 43.6, which adjusts to 38.4 on a last twelve months basis as of Q1 2024, European Wax Center is trading at a valuation that warrants attention. The company's gross profit margins remain impressive at 72.33%, highlighting its ability to retain a significant portion of revenue after accounting for the cost of goods sold.
InvestingPro Tips indicate that management's aggressive share buyback strategy and the expectation of net income growth this year are positive signals for potential investors. Moreover, with liquid assets surpassing short-term obligations, the company's financial stability appears solid. Still, it is also worth noting that the stock has experienced a decline, trading near its 52-week low and registering significant price drops over various periods in the last year.
For those considering an investment in European Wax Center, there are 15 additional InvestingPro Tips available, which could provide further guidance on the stock's outlook. To access these tips and enhance your investment strategy, use the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription.
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