Kits Eyecare wins bullish new price target from Roth Capital

Following the company’s year end financial report, Roth Capital analyst Matt Koranda says he is feeling positive about Kits Eyecare’s (Kits Eyecare Stock Quote, Chart, New, Analysts, Financials TSX:KITS) prospects for 2023.

On March 9, Kits Eyecare reported its Q4 and fiscal 2022 results. In the fourth quarter the company lost $1.4-million on revenue of $26.2-million, a topline that was up 29 per cent over the $20.3-million the company posted in the same period a year prior.

“We closed out the year with accelerated momentum and delivered another quarter of double-digit revenue growth, margin expansion and impressive performance,” said Roger Hardy, co-founder and chief executive officer of Kits. “In 2022, the team delivered record results as the Kits brand continued to resonate with new and returning customers.

“Since our inception just four years ago, we’ve established Kits as the fastest-growing brand in the compelling optical category, built a one-of-a-kind automated manufacturing facility and expanded to a current annual revenue run rate exceeding $100-million. As we continue to expand our footprint across North America, we’ll lean on the deep skill sets of the Kits team, along with our highly recurring business model, to drive organic growth. Even during tough economic times, the vision care category remains resilient with what we believe will deliver asymmetric upside for shareholders. With a strong balance sheet and growth funded through cash flow, we are confident that we are on the right path to accelerated value creation. We look forward to continuing to execute on our growth strategy in 2023 while providing the best care and value for our customers.”

“Kits delivered 4Q results slightly ahead our estimates, which we had reset higher after the positive preannouncement in January,” said Koranda. We see building fundamental momentum heading into 2023. A growing list of active users (+15% YoY) appears to be transacting more (repeat glasses purchases 36% of glasses sales) at higher AOVs (4Q glasses AUR +8% YoY). The kicker for investors: Kits is doing this with nice cost discipline, delivering adj EBITDA profit in 4Q.”

In a research update to clients Monday, Koranda maintained his “Buy” rating on KITS, but raised his one-year price target on the stock from $4.25 to $5.75, implying a return of 32.1 per cent at the time of publication.

The analyst thinks KITS will post EBITDA of $1.8-million on revenue of $106.8-million in fiscal 2023.