In a report released today, Jeff Lick from B.Riley Financial downgraded Children’s Place (PLCE – Research Report) to a Sell, with a price target of $4.00.
Jeff Lick’s Sell rating on Children’s Place is based on a multitude of concerns, primarily the company’s precarious financial position and the high likelihood of distressed conditions worsening. Lick notes that while Children’s Place has the potential for considerable EBITDA, this optimistic view remains speculative given the company’s current negative EBITDA, substantial net debt, and a pressing seasonal funding requirement. Furthermore, Children’s Place’s financial maneuvers, aimed at maintaining credit agreement compliance, suggest a trajectory that typically does not bode well for equity stakeholders. Lick’s assessment factors in a scenario where the company manages to pull off a sizeable EBITDA turnaround and secure capital, yet even in that best-case scenario, the dilution would heavily impact current stock value.
The company’s near-term outlook is also grim due to a significant immediate funding need for inventory and operations, without which vendor relationships and business continuity could be in jeopardy. Lick’s analysis indicates that the company’s current EBITDA and debt levels paint a bleak picture for equity value, and any new investment would likely be highly dilutive. He also highlights the risks of inaction, pointing out that while a portion of funding needs could be met internally, it leaves a thin margin for error, especially during the company’s weakest quarter. The report suggests that despite some positive aspects in the recent quarter, these are overshadowed by the overarching financial challenges and the low probability of a favorable outcome, leading to the conclusion that the risks far outweigh the potential gains for investors.
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Children’s Place (PLCE) Company Description:
The Children’s Place, Inc. engages in the provision of apparel, footwear, accessories, and other items for children. It also designs, contracts to manufacture and sell fashionable and value-priced merchandise under the brand names of The Children’s Place, Place and Baby Place. The company was founded in 1969 and is headquartered in Secaucus, NJ.
Read More on PLCE:
- Children’s Place Seeks Financing for Operational Stability
- Children’s Place (NASDAQ:PLCE) Liquidity Concerns Sends Stock Tumbling
- The Children’s Place Announces Preliminary Unaudited Results for the Fourth Quarter 2023
- Children’s Place lowers Q4 revenue view to $454M-$456M from $460M-$465M
- Children’s Place hires Centerview to boost cash reserves, Bloomberg reports
