Market Overview

DA Davidson Upgrades Black Diamond To Buy, Says 'Valuation Well Below Full Potential'

Share:
DA Davidson Upgrades Black Diamond To Buy, Says 'Valuation Well Below Full Potential'

The core brand of Black Diamond Inc (NASDAQ: BDE) is approaching positive inflection, with gross margin expansion expected to restore profitability, DA Davidson’s Andrew Burns said in a report. He upgraded the rating on the company from Neutral to Buy, while raising the price target from $4.50 to $6.

Black Diamond faced a challenging onshoring process that significantly impacted its gross margins, while also dealing with a recall on five products for inspection. Analyst Andrew Burns commented that “management's intense focus on this matter” seems to be generating results, with the company having resumed adequate production levels and achieved improved product quality testing.

Related Link: Black Diamond Misses EPS Estiamtes, Beats Sales

“With revenue stabilized and SG&A expenses right-sized, we believe gross margin improvement can restore profitability,” Burns wrote.

Valuation Low

Black Diamond’s current share price implies a valuation of $60 million for the company’s core brand, which is significantly below acquisition price.

“BDE acquired its namesake brand in 2010 for $86 million and PIEPS for $13 million in 2013. Combined these companies generated ~$100 million the year they were acquired. In 2016, revenue has grown to $145-$150 million (guidance), or $155-$160 million in c.c. terms, reflecting strong underlying demand for BD products,” the analyst stated.

Although the company has organic growth of more than 45 percent, the current market value is at a discount of about 40 percent to the $99 million purchase price. Burns expects valuation to improve as profitability is restored.

Do you have ideas for articles/interviews you'd like to see more of on Benzinga? Please email feedback@benzinga.com with your best article ideas. One person will be randomly selected to win a $20 Amazon gift card!

Latest Ratings for BDE

DateFirmActionFromTo
Aug 2017Stifel NicolausUpgradesHoldBuy
Mar 2017Stifel NicolausDowngradesBuyHold
Aug 2016DA DavidsonUpgradesNeutralBuy

View More Analyst Ratings for BDE
View the Latest Analyst Ratings

 

Related Articles (BDE)

View Comments and Join the Discussion!

Posted-In: Andrew Burns DA DavidsonAnalyst Color Long Ideas Upgrades Price Target Analyst Ratings Trading Ideas Best of Benzinga

Latest Ratings

StockFirmActionPT
PMTB of A SecuritiesMaintains18.5
IVRB of A SecuritiesMaintains3.0
EFCB of A SecuritiesMaintains15.5
NYMTB of A SecuritiesMaintains3.5
NLYB of A SecuritiesMaintains8.5
View the Latest Analytics Ratings
Don't Miss Any Updates!
News Directly in Your Inbox
Subscribe to:
Benzinga Premarket Activity
Get pre-market outlook, mid-day update and after-market roundup emails in your inbox.
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Fintech Focus
A daily collection of all things fintech, interesting developments and market updates.
Thank You

Thank you for subscribing! If you have any questions feel free to call us at 1-877-440-ZING or email us at vipaccounts@benzinga.com