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Residential swimming pools company Latham Group (NASDAQ:SWIM) was downgraded by Bank of America, citing weak new pool construction and higher decrementals.
The stock was trading 23.78% down Wednesday pre-market at $2.50 after the ratings action, about 11% below its 200-day simple moving average.
BoA lowered the recommendation on the stock to Underperform, and reduced the price target to $2.60 from $4.50.
SWIM initiated the 2024 guidance with revenue expectations of between $490M and $520M, vs. consensus of $533.09M, and adjusted EBITDA guidance of $60M to $70M. The midpoint of the guidance range is roughly 8% and 35%, respectively, below their previous expectations.
The downgrade considers a softer-than-expected start to 2024, lower expectations for new pool construction in 2024, operating deleverage and limited free cash flow generation.
The management expects new pool construction to decrease by ~15% Y/Y in 2024.
The rating contradicts from the average sell-side analyst rating of Buy, with average price target of $3.54. Seeking Alpha’s Quant Rating system grades the stock a Hold.
