On Thursday, Baird adjusted its outlook on European Wax Center (NASDAQ:EWCZ), reducing the price target to $13.00 from the previous $15.00 while keeping a Neutral rating on the stock. The first quarter (Q1) results for European Wax Center showed revenue in line with consensus estimates and an adjusted EBITDA that exceeded expectations.
However, comparable store sales (comps) experienced a slight decline of 1.2%, which was attributed to factors such as adverse weather conditions and the timing of Easter. The company's management has indicated a more staggered schedule for new unit openings.
Despite the current year's targets for comps growth remaining steady at an anticipated 2-5%, this forecast depends on a pickup in business activities, as indicated by the company's planned initiatives.
Baird's analyst noted that while the second quarter (Q2) is tracking slightly positive, a cautious approach is being taken in the near term. The firm believes that there is a possibility for European Wax Center's valuation to increase over time if the company can demonstrate improved revenue visibility.
European Wax Center's current valuation is under 14 times the next twelve months' (NTM) enterprise value to EBITDA (EV/EBITDA) ratio. Baird's stance suggests that while the near-term outlook remains guarded, there is optimism for the company's future performance.
InvestingPro Insights
European Wax Center's (NASDAQ:EWCZ) financial metrics reveal a company with a strong gross profit margin of 71.66% over the last twelve months as of Q4 2023, reflecting efficient operations and a solid business model. Despite trading near its 52-week low, the company is expected to see net income growth this year, which could be a catalyst for a valuation rebound. With a market capitalization of $695.25 million and an adjusted P/E ratio of 64.63, the company is trading at a high earnings multiple, suggesting that investors have high expectations for future earnings growth.
InvestingPro Tips highlight that European Wax Center's liquid assets exceed short-term obligations, which indicates a healthy financial position to meet immediate liabilities. Moreover, analysts predict the company will be profitable this year, which aligns with Baird's outlook for potential valuation increase over time if revenue visibility improves. For investors seeking more detailed analysis, there are 11 additional InvestingPro Tips available, which can be accessed to gain deeper insights into European Wax Center's financial health and market position. To explore these insights further, consider using coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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