Cricut (NASDAQ:CRCT) stock closed 28.93% higher on Monday following the announcement of a special cash dividend. CRCT, which provides hardware and software for creative DIY projects, announced a special cash dividend of $1 per share to be payable on July 17, 2023, to investors of record as of July 3, 2023.
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The move comes as a positive surprise because the company is dealing with lower consumer demand and declining sales.
Nonetheless, CRCT is profitable, and the company’s management remains upbeat about generating higher cash flows this year, which supports shareholder-friendly moves.
Management stated that the company is well-positioned to fund its growth initiatives. Further, its focus on bringing inventory levels down will generate higher cash flow in 2023. In Q1 2023, CRCT generated $95 million of positive cash flow from operations. This reflects a benefit of $49 million from inventory reduction.
While CRCT is likely to generate positive cash flows, pressure on consumer spending could continue to weigh on demand and hurt its financials. The company recently delivered a lower-than-expected Q1 performance, wherein its top line fell 26%. Further, its adjusted earnings of $0.07 declined from $0.11 in the prior-year period.
Is CRCT Stock a Buy, Sell, or Hold?
Citing weak consumer sentiments, Barclays analysts Adrienne Yih lowered CRCT’s price target to $6 from $7 on May 11. The analyst recommends a Sell on CRCT stock.
Overall, CRCT stock has one Hold and two Sell recommendations for a Moderate Sell consensus rating. Meanwhile, analysts’ average price target of $7 implies 24.49% downside potential from current levels.
