Roth Capital Boosts Price Target On Sequential Brands To $16
In a research note issued today, Roth Capital analyst Dave King raised his price target on Sequential Brands Group, Inc. (SQBG) from $10.00 to $16.00, while maintaining a Buy rating on the stock following SQBG’s agreement to acquire Galaxy Brand Holdings.
King comments: “Sequential Brands entered a definitive agreement to acquire brand licensing competitor Galaxy Brand Holdings for $260M. Although the price looks somewhat expensive, some of the potential benefits include meaningful accretion and the removal of a key competitor for M&A transactions. We continue to like SQBG for its profitable and scalable business model, industryleading management, and fast-growing portfolio of consumer brands.
The analyst continues: “We are increasing our price target from $10 to $16, which now assumes shares should trade at 25x estimated “normalized/targeted” 2016 EPS of $0.65, which is based on the company achieving its $100 million in royalty revenue target with a 70% EBITDA margin. Inherent in this projection is the assumption that future deal multiples will return to management’s targeted range of 5.0x-7.0x. We also believe these royalty revenue and EBITDA targets will get updated as the company approaches this goal through the continued pursuit of 2-3 acquisitions per year”.
According to TipRanks, which measures analysts and bloggers success rate based on how their calls perform, analyst Dave King currently has an average return of -3.1% and a 36% success rate. He is ranked #2735 out of 3135 analysts.