Kits Eyecare wins price target raise at Ventum

Ventum Capital Markets analyst Jason Zandberg is feeling more and more bullish about Kits Eyecare (Kits Eyecare Stock Quote, Chart, News, Analysts, Financials TSX:KITS).

In a research update to clients June 6, the analyst maintained his “Buy” rating on KITS but raised his price target on the stock from $8.25 to $10.00.

The analyst says the company has earned a richer valuation.

“We’re revising our revenue and EBITDA estimates higher and feel that KITS warrants a higher target multiple due to its impressive financial performance when compared with peers, notably Warby Parker (NYSE-WRBY), who serves as the Company’s closest peer,” Zandberg said. “On a TTM basis, KITS is trading at 1.5x sales while WRBY is trading at 2.0x. Our new blended target multiple is 2.0x EV/FY24 sales (previously 1.7x). This blended target multiple is based on our weighted average of peer EV/Sales, peer EV/EBITDA and our DCF calculation. Despite the recent run up in the share price, we remain bullish on KITS and see upside on our target.”

The analyst thinks KITS will post Adjusted EBITDA of $5.0-million on revenue of $144.6-million in fiscal 2024. He expects those numbers will improve to EBITDA of $12.3-million on a topline of $173.6-million in fiscal 2025.

“Relative to Warby Parker (NYSE-WRBY), Kits Eyecare has had superior historical growth rates, expanding gross margins compared to WRBY’s margin contraction and higher EBITDA margins. Despite the better financial metrics KITS has traded at a materially lower EV/Sales multiple. The trading multiple gap is closing, and we anticipate this gap will continue to get smaller as KITS continues to execute,” he added.