One of the most powerful catalysts for any stock is a substantial change in a researcher’s price target. That was the dynamic behind the more than 2% gain of European Wax Center (NASDAQ: EWCZ) on Monday, as an analyst tracking the stock significantly upped her fair value assessment. The stock’s rise far outpaced the less than 0.1% increase of the S&P 500 index that day.
A 33% price target hike
Well before market open, Citigroup‘s Kelly Crago made the move. She upped her European Wax Center price target to $6 per share, a relatively high figure given that her previous estimation was $4.50. Despite the 33% increase, Crago maintained her neutral recommendation on the stock.
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In her update on the company, according to reports, Crago waxed bullish about its first-quarter results published last week. She wrote that it benefited from modestly stronger overall sales and managed to come in above consensus for same-store sales growth, always a crucial and closely watched metric in the retail industry.
She also complimented European Wax Center’s management, writing that it’s finding ways for the company to grow and ramping up marketing to bring in new customers. On the down side, its overall strategy is still not entirely clear, one key reason Crago left her recommendation unchanged.
Is the trend a friend?
I’d agree with the analyst’s take on Q1, which was almost unarguably positive. Yet I’m also sympathetic with her sticking to the neutral recommendation; trends are a major factor in the retail world, and I’m not convinced waxing is a trend that will heat up more than it already has. Personally, I’d probably give European Wax Center stock a miss.
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Citigroup is an advertising partner of Motley Fool Money. Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
