Is Gaiam A Buy? Imperial Capital Thinks So

In a report published Friday, Imperial Capital analyst John O'Neil initiated coverage of

with an Outperform rating and a price target of $7.50, expressing optimism regarding the growth opportunities for leading yoga and fitness brands. Gaiam recorded revenues of $167mn and EBITDA of about breakeven for the 12-month period ended March 31, 2015. At that time, the company had no debt and $17mn in cash. In the report Imperial Capital noted, "The primary catalysts for appreciation, in our opinion, are the expected sales acceleration and a swing toward profitability in 2015, in part due to the TV business no longer generating operating losses and the addition of the exclusive apparel launch with Kohl's." Analyst John O'Neil believes that Gaiam's apparel line "dovetails well with the industry's current ‘athleisure' trend" and the company could add "other distribution channels for apparel" next year. On the consumer products side, Gaiam seems poised to benefit from the growing demand for health and wellness products and is expected to expand distribution to target new market segments, such as men's yoga in sporting goods stores, wellness products in mass merchants and drug stores, and fitness products through multiple channels. O'Neil added that the acquisition of Yoga Studio in 2014 "arms Gaiam with leading fitness content on the iTunes platform."