Why Is Latham (SWIM) Stock Soaring Today
What Happened:
Shares of residential swimming pool manufacturer Latham (NASDAQ:SWIM) jumped 22% in the morning session after Stifel analyst upgraded the stock's rating from Hold (Neutral) to Buy and raised the price target from $3 to $4, noting that the stock was "dramatically undervalued." The new price target implied a potential 25% percent upside from where shares traded when the upgrade was announced.
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What is the market telling us:
Latham's shares are very volatile and over the last year have had 68 moves greater than 5%. But moves this big are very rare even for Latham and that is indicating to us that this news had a significant impact on the market's perception of the business.
The previous big move we wrote about was 5 days ago, when the stock dropped 23.9% on the news that the company reported fourth-quarter results and provided full-year revenue and EBITDA guidance that fell short of analysts' estimates as it expected more industry softness in 2024, projecting a ~15% decline in new pool installations in its markets. Despite the weakness, management noted it gained market share in 2023, especially with its fiberglass pools (fiberglass products accounted for ~73% of the company's in-ground pool sales in 2023). Adding to the positive, Latham exceeded analysts' operating margin and EPS expectations during the quarter. Zooming out, this was still a decent, albeit mixed, quarter, showing that the company is staying on track.
Following the results, Bank of America downgraded the stock's rating from Buy to Underperform (Sell) and lowered the price target from $4.5 to $2.6. The new price target represents a potential 13% downside to where shares traded when the downgrade was announced.
Latham is up 38.2% since the beginning of the year, but at $3.46 per share it is still trading 24.2% below its 52-week high of $4.56 from July 2023. Investors who bought $1,000 worth of Latham's shares at the IPO in April 2021 would now be looking at an investment worth $126.79.
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