KITS Eyecare wins target raise at Haywood

With sales soaring, Haywood analyst Gianluca Tucci has raised his price target on Kits Eyecare (Kits Eyecare Stock Quote, Chart, News, Analysts, Financials TSX:KITS).

On September 4, KITS upwardly revised its Q3 revenue guidance, noting that it now expects a topline of $39.0- to $41.0-million.

The analyst summarized the development.

“KITS announced a record-breaking sales week ending Aug 31 of ~$3.5M leading to an upward Q3/24 guidance revision,” he wrote. “The Company now expects revenue to exceed the high end of its $39-41M range, which would imply 32%+ organic growth. Adj. EBITDA margin guidance has remained constant at 3-5% of revenue. We continue to believe KITS is showing the market why it should start to be valued like an internet/ecommerce company rather than a pure optical play. We raise our target price to $16 from $15 on upwardly revised estimates and an increase in our terminal EBITDA multiple to 20.5x from 20x. Bottom line, while KITS is a vertically integrated player in the optical industry, we believe that because of KITS’ pure ecommerce fulfillment model and online customer acquisition model, it deserves a blend of an optical & internet/ecommerce multiple. Our increased terminal EBITDA multiple better reflects a more appropriate, yet conservative blend of its internet / ecommerce peers with 20%+ expected growth, and its optical peers. We highlight our terminal multiple and target price present continued upside potential if KITS continues to deliver on outsized revenue growth as today’s announcement illustrates – our 20.5x terminal EBITDA multiple is well below its internet/ecommerce peer average of 31.8x.”

In a research update to clients September 4, Tucci maintained his “Buy” rating but raised his price target on the KITS from $15.00 to $16.00, implying a return of 47% at the time of publication.

The analyst thinks KITS will post Adjusted EBITDA of $5.3-million on revenue of $154.6-million in fiscal 2024. He expects those numbers will improve to Adjusted EBITDA of $12.1-million on a topline of $180.9-million the following year.

“We reiterate our Buy recommendation and raise our Target Price to $16.00 from $15.00. KITS is well-positioned to continue scaling revenue and margins organically while opportunistically acquiring to establish a presence in new regions. Our target revision is principally driven by an increase in near-term estimates as well as an increase in our terminal EV/EBITDA multiple,” Tucci added.