Piper Jaffray Remains Sidelined on Sally Beauty Holdings (SBH) as Concerns Grow
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Piper Jaffray maintained a Neutral rating on Sally Beauty Holdings (NYSE: SBH), and cut the price target to $28.00 (from $30.00), following the company's 3Q earnings report. Recent pullbacks in SBH shares would historically have been viewed as a favorable buying opportunity. However, concerns are being validated by near-term fundamentals that the business is getting increasingly costly to achieve similar run rates in sales.
Analyst Stephanie Wissink commented, "We are heavily conflicted in our view of SBH shares on the pullback. It would appear a decent buying opportunity for a model that is comping positively and delivering modest margin improvement. However, increased variability quarter to quarter is creating valuation risk and resurfacing questions around the costs to sustain growth. The company has deployed heavy efforts at the store level over the last year to drive better continuity in traffic, but loyalty card customers continue to shop retail stores less, implying cost levels are out of synch with sales. The professional segment is benefiting from a mix shift as stores capture more volume from the legacy sales force. On balance, total comps were below models in Q2, the recovery curve is being elongated, and downside risk remains to traffic recovery assumptions. We are lowering our multiple to 16x and PT to $28 as a result."
Shares of Sally Beauty Holdings closed at $26.49 yesterday.
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Create E-mail Alert Related CategoriesAnalyst Comments, Analyst EPS Change, Analyst EPS View, Analyst PT Change
Related EntitiesPiper Jaffray, Earnings
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