Investors looking to get an edge over the big guns need to look for gems which have yet to catch Wall Street’s attention.
For a while now, H.C. Wainwright analyst Scott Buck has been the lone analyst banging the drum for XpressSpa (XSPA), believing this name represents an untapped opportunity. With the stock down 45% year-to-date, on the back of the airport wellness/Covid-19 testing business’s latest quarterly statement, the analyst remains bullish as ever.
“Despite the company’s high level of execution, XSPA shares continue to fall victim to broader market challenges,” Buck said. “We believe this creates a significant opportunity in XSPA shares as positive news flow, including an acceleration in share repurchase activity and improving financial results, should continue in 2022 and 2023.”
During the height of the corona crisis, the company turned its closed airport wellness business into Covid-19 testing centers. Now XSPA is benefitting from both revenue streams.
The company generated revenue of $29.4 million in 4Q21, some way above Buck’s $27.1 million forecast and higher than the preliminary revenue announced back in January.
The revenue beat is down to the popularity of XpresCheck testing centers, which benefited from strong demand during the holiday season. Service revenue also saw an uptick as the legacy spa business has proven increasingly popular too.
On the downside, higher costs around the launch of the Treat concept – the company opened its first new travel health and wellness brand store in December – and an $0.8 million impairment charge resulted in adj. EBITDA of $4.5 million, thereby falling short of Buck’s adj. EBITDA forecast of $8.0 million. However, that still compares favorably to the adj. EBITDA loss of $3.4 million recorded in the same period last year.
The company also saw out 2021 “well-capitalized,” with the balance sheet boasting $105.5 million of available cash, while Buck also expects the rollout of new Treat locations over the coming years to act as a “catalyst” for revenue. And with medical testing and “bio-surveillance” still set to play an important role, Buck is fully behind this name.
“As the business continues to scale towards management’s $500.0M 2025 revenue target, operating leverage should drive growth in both adj. EBITDA and EPS. A positive and growing bottom line, achievable in 2022, should attract new investors to XSPA shares, In our view.” (To watch Buck’s track record, click here)
It’s no surprise to learn, then, Buck rates XSPA shares a Buy, while the $4 price target makes room for growth of 212% in the year ahead. (See XSPA stock forecast on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
