After releasing preliminary fourth quarter numbers, Kits Eyecare (Kits Eyecare Stock Quote, Charts, News, Analysts, Financials TSX:KITS) is still a “Buy”, according to Roth Capital Partners analyst Matt Koranda, who delivered an update to clients on the company on Wednesday. Koranda said Kits’ Q4 sales look solid and that the digital eye care platform is setting up for a strong 2023.
Vancouver-based Kits Eyecare announced on Tuesday it expects Q4 2022 revenue to come in at approx. $25 million, which would represent a year-over-year increase of 25 per cent and a nine per cent sequential rise. Year-end cash balance is expected to be about $19 million.
“We have now grown revenue 145 per cent since pre-pandemic levels in 2019, while adding significantly to the complexity and competitive moat of the offering,” said KITS CEO and co-founder Roger Hardy in a press release.
“KITS has evolved from a digitally native retailer to a vertically integrated retail manufacturer. In addition, we are now a preferred partner to some of the leading insurance providers in the market, rounding out the third leg of the KITS eyecare competitive stool. The Company’s growth accelerated in each of the past two quarters as the offering continued to gain traction in each segment,” Hardy wrote.
Kits, which IPO’d on the Toronto Stock Exchange in January 2020, offers vision testing, prescription renewals and products like contact lenses and glasses through its website, with about 80 per cent of its sales generated in the US and 20 per cent in Canada. Kits has so far served over 600,000 customers and currently has a 69 per cent repeat rate.
On the Q4 numbers, Koranda said the prior consensus as well as Roth’s estimate on revenue was $24.4 million compared to the pre-announced $25 million. The analyst said cash looks healthy at $19.0 million, while he sees sales growth accelerating over 2022: revenue grew by negative two per cent for Q1, was flat at zero per cent for Q2, and then jumped to plus 18 per cent for Q3, with the Q4 now anticipated at plus 25 per cent.
The result is a bump up in Koranda’s Q1 2023 revenue estimate to $25.1 million from previously $23.5 million. For the 2023 year, the analyst is calling for revenue of $106.7 million and EBITDA at positive $1.9 million, and moving to 2024 revenue at $118.9 million and EBITDA at $5.3 million.
With his update, Koranda nudged up his target price on Kits from $4.00 to $4.25, representing at press time a projected one-year return of 34.9 per cent.
“We believe Kits deserves more credit for the improving top line trajectory. We are using a 1.2x multiple on our 2023 sales outlook (EV/sales),” Koranda wrote.