WMT - National Vision shares bruised by end of Walmart partnership Citi and Wells Fargo downgrade the stock

2023-07-27 13:07:35 ET

Shares of optical retailer National Vision Holdings ( NASDAQ: EYE ) cratered 20% on Thursday, after Citi lowered EYE to Neutral from Buy, cut the PT to $22 from $28. Wells Fargo downgraded EYE to Equal Weight from Overweight, slashed PT to $20 from $30.

On Wednesday, National Vision said that its partnership with Walmart ( WMT ) will end in 2024. The company said the partnership contributed $348.9M in revenue in 2022.

According to Citi, the end of EYE's partnership with Walmart puts more focus on EYE's core business which has been struggling with dull comps and high spending on remote medicine initiatives.

Citi lowered its 2023 EPS estimate for EYE to $0.52 from $0.57. It also lowered 2024 EPS estimate to $0.53 from $0.65.

"Ending WMT partnership a blessing and a curse," said Wells Fargo. The brokerage noted that while EYE could benefit from a less complex structure, it would be difficult for the retailer to replace about 15%-20% of lost sales overnight.

Wells Fargo expects EYE's unit growth to offset the loss of the Walmart partnership, although in a long period of time. It expects 2023 to be a a difficult year for the company with a CFO transition, departure of IR head David Mann in January, and lower-than-expected 2023 outlook.

Seeking Alpha analysts at large rate the stock as Buy. This compares with SA Quant rating of Sell and average Wall Street rating of Buy.

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