Market Overview

Tile Shop Stock Still Carries A High Multiple, Analyst Says

Share:
Tile Shop Stock Still Carries A High Multiple, Analyst Says

Shares of Tile Shop Hldgs, Inc. (NASDAQ: TTS) plummeted more than 30 percent Tuesday morning and hit a new 52-week low of $8.40 after the company cautioned investors that its third-quarter sales will likely fall short of investor expectations.

Following the announcement, Telsey Advisory Group's Joseph Feldman downgrades Tile Shop's stock rating from Market Perform to Underperform with a price target slashed from $17 to $7 as the company also withdrew its full-year guidance. In fact, the company's announcement marks the second consecutive quarter where expectations weren't met and there are legitimate concerns this may continue for several more quarters.

Granted, the company's woes could be attributed to recent hurricanes but this was "not called out" by management, Feldman commented in a research report. Instead, the company highlighted the competitive environment that prompted a step up in promotional activity and marketing. Also, consumers appear to be shopping for entry-level price point products, which forced the company to change its assortment.

Despite the fact that Tile Shop's stock is down more than 60 percent since its second-quarter earnings report, the stock's P/E multiple is still high, which implies a risk of further compression in the valuation amid slowing sales and worsening profitability. Specifically, shares are trading at a P/E multiple of 25x and there could be downside to a 20x multiple.

Over the longer term, Tile Shop may be forced to incrementally invest in prices to gain customers and the analyst is modeling a gross margin compression of 165 basis points in 2017 and 200 basis points the following year.

At time of publication, shares were down 36.36 percent at $8.40.

Related Links:

5 Stocks To Watch For October 3, 2017

Mid-Morning Market Update: Markets Open Higher; Paychex Profit Beats Estimates

Latest Ratings for TTS

DateFirmActionFromTo
Jul 2019Telsey Advisory GroupDowngradesMarket PerformUnderperform
May 2019CitiDowngradesBuyNeutral
Oct 2018Telsey Advisory GroupUpgradesUnderperformMarket Perform

View More Analyst Ratings for TTS
View the Latest Analyst Ratings

 

Related Articles (TTS)

View Comments and Join the Discussion!

Posted-In: Analyst Color Earnings News Guidance Short Ideas Downgrades Price Target Analyst Ratings Best of Benzinga

Latest Ratings

StockFirmActionPT
BIIBRBC CapitalMaintains277.0
RLICompass PointInitiates Coverage On90.0
CSCOWolfe ResearchDowngrades42.0
NKEBarclaysMaintains132.0
GILDRBC CapitalMaintains86.0
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