What Happened?
Shares of pool products retailer Leslie’s (NASDAQ: LESL) fell 4.8% in the morning session after Morgan Stanley downgraded the stock to Underweight from an Equal-Weight rating and sharply cut its price target.
The firm lowered its price outlook on Leslie's shares to $1.50 from $3.50. The downgrade reflected concerns about the company's limited visibility for sustained sales growth, declining unit growth, and restricted financial flexibility for necessary reinvestments. Analysts also pointed to the company's significant debt load and its lack of profitability over the previous twelve months as reasons for the negative outlook.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy Leslie's? Access our full analysis report here, it’s free.
What Is The Market Telling Us
Leslie’s shares are extremely volatile and have had 96 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 11 days ago when the stock gained 11.5% on the news that the White House announced a one-year delay on planned tariff hikes for many home goods, including furniture and cabinets.
The decision kept the current 25% tariff rate in place, averting a scheduled increase to as high as 50% for items like kitchen cabinets and bathroom vanities that was set to take effect on New Year's Day. This move provided significant relief for retailers, as higher tariffs typically lead to increased costs. Companies would have faced the difficult choice of absorbing the extra expense, which hurts profitability, or passing it on to customers through higher prices, which could reduce sales. The news was met with investor optimism, sparking a rally in the sector.
Leslie's is down 6.4% since the beginning of the year, and at $1.62 per share, it is trading 96.4% below its 52-week high of $44.80 from February 2025. Investors who bought $1,000 worth of Leslie’s shares 5 years ago would now be looking at an investment worth $2.75.
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