VPH stock has price target lowered at Echelon

Following the company’s fourth quarter results, Echelon Capital Markets analyst Stefan Quenneville has lowered his price target on Valeo Pharma (Valeo Pharma Stock Quote, Chart, News, Analysts, Financials TSX:VPH).

On January 29, VPH released its Q4, 2023 results. The company posted an Adjusted EBITDA loss of $4.5-million on revenue of $53.9-million, a topline that was up 94 per cent over the same period a year prior.

“Valeo delivered another year of significant growth in 2023 with annual revenues and adjusted gross profit increasing 94 per cent and 80 per cent respectively over 2022. Our three main pillars of growth, Enerzair, Atectura and Redesca, all experienced growing revenues, market share gains and are positioned for further growth in 2024,” CEO Steve Saviuk said. “Our main focus for 2024 is to accelerate our path to profitability, in our ongoing effort to drive value for our shareholders. We look forward to seeing the impact of our recently implemented cost reduction initiatives and organizational realignment measures materializing, starting in the first quarter of 2024, and having full impact by the third quarter of 2024.”

The analyst January 30 maintained his “Speculative Buy” rating but lowered his price target from $0.80 to $0.60. He explained his reasoning in an update to clients.

“Valeo Pharma yesterday announced FQ423 results (period ending October 31, 2023) which came in significantly below expectations as previously strong growth trends decelerated in the quarter,” he wrote. “While the company announced ~$2M+ in cost-cutting initiatives in November to address the pending loss of Xiidra rights (expected mid-year), the company appears to have lost some growth momentum as it looks to business development opportunities to fill the gap left by Xiidra. As such, we are lowering our target price to $0.60 (from $0.80) as we temper our near-term growth outlook. Nevertheless, we continue to view VPH as a compelling opportunity for investors and reiterate our Spec. Buy rating, with potential near-term BD activities being a likely catalyst for the stock.”

Quenneville thinks VPH will post EBITDA of negative $4.2-million on revenue of $64.1-million in fiscal 2024.

“Given the unexpected loss in sales momentum, we are tempering our revenue outlook for F2024 to $64M (from $78M) and pushing back our expectations of Adj. EBITDA breakeven to FQ424 (from FQ224). This results in the lowering of our price target to $0.60/sh (from $0.80), which is derived using a 2.2x F2024 EV/Sales multiple. Nevertheless, we continue to view VPH as a compelling opportunity for investors and reiterate our Spec. Buy rating, with potential near-term BD activities being a likely catalyst for the stock,” he concluded.