Investing.com– Stifel upgraded Fox Factory Holding Corp (NASDAQ:) stock to “Buy” because it considers the current valuation to be an attractive starting point, citing a favorable balance of risk and reward.
Stifel analysts said in a note that there is potential for improved sentiment in 2025, driven by a recovery in FOXF’s high-margin bicycle business.
Stifel maintains a $40 price target for Fox Factory and upgrades the company’s stock rating to “Buy” from “Hold.”
After seven consecutive quarters of disappointing guidance revisions and tender preliminary FY25 guidance, FOXF stock is struggling. But Stifel believes the edged selloff, driven in part by tax-loss sales and tariff concerns, creates an attractive opportunity for long-term investors.
The bicycle category, which represents 57% of FOXF’s estimated earnings improvement in fiscal 2026, is key to Stifel’s upbeat outlook, Stifel analysts say. After two years of destocking, the bicycle industry began to recover, with third-quarter revenue reaching $100 million.
Stifel projects a normalized annual revenue rate for the category of $400 million, driven by price increases, contributions from e-bikes, and a potential shift from dealer drawdowns to restocking by the end of 2025. At that level, the bicycle segment could generate more than $110 million dollars in According to Stifel, profits significantly exceed expectations for 2024.
While other divisions – Powered Vehicle Group (PVG) and Advanced Avocation Group (AAG) – face ongoing challenges, Stifel sees stabilization on the horizon by mid-2025. The analysts added that expected cost savings of $25 million and a possible recovery in demand could unlock margin improvement in the second half of 2025.
The brokerage said current levels present an opportunity to build positions in FOXF stock, with circumscribed downside and potential for recovery as business fundamentals stabilize.
