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Goldman Sachs Celebrates Party City

Party City PRTY's Positive Outlook Cause For Celebration, Goldman Sachs Initiation

Although Goldman Sachs’ Stephen Tanal holds a constructive view on the long-term prospects for Party City Holdco Inc PRTY 2.77%, the analyst believes the share price is fair at present, given expectations of slower earnings growth in H2.

Tanal initiated coverage of the company with a Neutral rating and price target of $17.

Key Growth Drivers

The analyst believes there are three key growth drivers for Party City, including the persisting increase in the popularity of Halloween as a “spending event.”

“In 2016, however, Halloween shifts to a Monday from a Saturday, a likely headwind to 4Q,” Tanal noted.

The analyst also expressed optimism regarding vertical integration as a growth driver, supported by bolt-on acquisitions expected to continue to drive margin expansion.

On the other hand, Tanal also cautioned that “share of shelf gains are slowing, and commodity tailwinds moderating.”

The third growth driver the analyst pointed out was balance sheet deleveraging, which could act as an EPS tailwind, although the leverage was elevated at present, with a “heavy mix of floating rate debt.”

However, deleveraging could help free up cash that could be put to more productive use, the analyst concluded.

Oct 2016Goldman SachsInitiates Coverage OnNeutral
Aug 2016Goldman SachsMaintainsNeutral
Aug 2016JP MorganMaintainsOverweight

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