Party City In 2017: 'Healthy Underlying Trends, Numerous Growth Opportunities'

Party City Holdco Inc PRTY will likely deliver improved results in 2017, with mid-to-high single-digit EBITDA growth and low double-digit EPS growth. This will be backed by “a relatively more normal seasonal calendar,” Frozen comps and growth opportunities for the wholesale business, Credit Suisse’s Seth Sigman said in a report.

Sigman maintained an Outperform rating on the stock, with a price target of $19. He commented, “We continue to believe that the PRTY story stacks up well, based on healthy underlying trends and a unique vertically integrated model that provides incremental sales drivers, continued margin benefit, and helps navigate the inherent volatility in retail.”

Improvement In 2017

Party City’s "everyday" business grew 3 percent in 2016, with growth accelerating in the last two quarters. The fourth quarter reflected continued stability in the company’s non-seasonal business despite volatility due to holiday shifts. The analyst expects "everyday" to continue improving in the first half of 2017.

Related Link: Party City Announces the Acquisition of Granmark

Halloween, the biggest sales event, was negatively impacted in 2016 by a shift to Monday, but should be neutral in 2017. Management doesn't expect the shift of Easter into Q2 to have a meaningful impact on Q1 comps. The shift of New Years out of Party City’s 2017 fiscal year will likely have a 30-50 bps [basis points] impact on 2017 comps and a 100 bps on Q4 comps, Sigman mentioned.

Apart from these seasonal considerations, the company’s performance should be relatively stable, the analyst mentioned.