Kits Eyecare earns target raise at Haywood

More bullish guidance from the company has Haywood analyst Gianluca Tucci raising his price target on Kits Eyecare (Kits Eyecare Stock Quote, Chart, News, Analysts, Financials TSX:KITS).

On March 17, KITS announced that it had upwardly revised its EBITDA guidance. Instead of four to six per cent, the company now expects six to eight per cent.

“We are pleased to increase our guidance for adjusted EBITDA from 4 to 6 per cent to 6 to 8 per cent, reflecting the strength of our business model and the continued momentum across our key growth drivers,” CEO Roger Hardy said. “We are seeing significant traction in new glasses customers as our latest collections resonate with first-time buyers and drive repeat purchases among existing customers. Consumption per customer remains strong as customers recognize the quality and value of our offering. As we continue to scale, we remain focused on delivering exceptional value to our customers while driving sustainable, margin-accretive growth for our shareholders.”

Tucci says the company is firing on all cylinders.

“KITS revised its Q1/25 Adj. EBITDA margin guidance upward from 4-6% to 6-8%. We attribute the margin guidance increase to the strong repeat order volume KITS is experiencing, in addition to the robust growth in its glasses business,” he wrote. “We remind readers of its reported Q4 KPIs including 63% of revenue coming from repeat customers and 60% growth in glasses revenue – gross margin on glasses is typically 50-60%+, significantly higher than 30-40% for contacts. Today’s guidance revision leads us to believe trends observed in Q4 have continued into 2025 and we consequentially raise our Adj. EBITDA margin outlook for the year to 6.0% from 5.2%, previously.

In a research update to clients March 17, Tucci maintained his “Buy” rating and raised his price target on KITS from $17.50 to $18.00, implying a return of 98% at the time of publication.

The analyst thinks KITS will post Adjusted EBITDA of $12.2-million on revenue of $201.9-million in fiscal 2025. He expects those numbers will improve to Adjusted EBITDA of $18.4-million on a topline of $236.2-million in fiscal 2026.

Tucci thinks this is a good time to buy KITS stock.

“The recent drawdown in KITS shares since the fall of 2024 appears overdone and presents an attractive buying opportunity for long-term investors,” he argued. “The Company’s fundamentals remain sound with continued growth in its key business lines. Its strategic initiatives are poised to drive sustainable value over the long haul. We also point to robust return customer volumes driving EBITDA margin acceleration and outperformance. We believe this pullback in KITS shares is an overreaction, and the stock is well positioned to re-rate as sentiment normalizes and as its fundamentals return to focus.”