On Thursday, Citi analyst Paul Lejuez adjusted the price target for National Vision Holdings (NASDAQ:EYE) to $12.00, up from the previous $11.00, while keeping a Neutral rating on the stock. The revision followed the company's earnings per share (EPS) report, which came in at $0.12, doubling the consensus estimate of $0.06 from FactSet. However, the company's comparable store sales (comps) showed a weaker-than-anticipated growth of +0.9%, falling short of the expected +1.6%.
National Vision's current comparable sales remain below the company's historical mid-single-digit (MSD) levels. The analyst highlighted a lack of signs pointing to a repurchase cycle or trade-down activities that could potentially benefit the company. In a strategic move, management announced plans to shut down 39 stores and to open between 30 to 35 new stores in 2025. The analyst expressed skepticism regarding the company's ability to accelerate store growth after 2025.
The company's struggle with doctor availability was also noted as a continuing issue. Despite the implementation of remote medicine in 730 stores, National Vision is still experiencing a significant number of stores that are either completely closed (low single-digit percentage of the fleet) or underperforming (high single-digit percentage of the fleet). The analyst suggested that the issue of doctor availability is structural and may not see improvement in the near future.
Lastly, the report considered the company's valuation, noting that at the current level of 7.2 times its forecasted fiscal year 2025 enterprise value to earnings before interest, taxes, depreciation, and amortization (EV/EBITDA), the risk/reward profile appears balanced. This assessment underpins the analyst's decision to maintain a Neutral stance on National Vision Holdings.
In other recent news, National Vision Holdings Inc. reported a modest revenue growth of 2.9%, reaching $451.5 million, and a rise in adjusted operating income to $14.3 million during their Q3 2024 earnings call. The company also announced a strategic shift in their store operations, with plans to close 39 stores by 2026 aiming for an adjusted EBITDA improvement of about $4 million. This move is part of a broader strategy to enhance customer experience and operational efficiency, which also includes slowing down new store openings in 2025.
National Vision's recent developments also include a focus on disciplined growth primarily under the America's Best brand, particularly in remote areas. The company also anticipates revenue headwinds due to store closures and has noted challenges in e-commerce and weather impacts from Hurricanes Beryl and Helene. However, positive trends in exam capacity and retention rates have been reported, and the company is optimistic about its margin profile for 2025. Despite a slight decline in remote exam penetration compared to Q2 due to digital experience issues, the company continues to expand its remote exam capabilities to mitigate the impact of dark and dim stores.
InvestingPro Insights
Recent data from InvestingPro sheds additional light on National Vision Holdings' (NASDAQ:EYE) financial performance and market position. The company's market capitalization stands at $934.98 million, reflecting its current valuation in the market. Despite the challenges highlighted in the analyst report, National Vision has shown a strong revenue growth of 14.71% over the last twelve months as of Q3 2024, reaching $2.18 billion. This growth suggests the company has been able to expand its sales despite the headwinds mentioned.
However, profitability remains a concern, as indicated by the negative return on assets of -0.74% for the same period. This aligns with the analyst's skepticism about the company's near-term prospects. On a more positive note, InvestingPro Tips point out that net income is expected to grow this year, and analysts predict the company will be profitable this year. These projections could provide some optimism for investors looking beyond the current challenges.
The stock's recent performance has been mixed, with a significant 15.21% return over the last month, but a substantial -33.46% decline over the past six months. This volatility reflects the uncertainties surrounding the company's operational issues and growth prospects.
For investors seeking a more comprehensive analysis, InvestingPro offers 11 additional tips for National Vision Holdings, providing a deeper understanding of the company's financial health and market position.
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