Last Update 01 Nov 25
Fair value Decreased 11%Upbound Group’s fair value price target has been revised downward by analysts from $36.38 to $32.38 per share. This change reflects updated expectations for slower revenue growth and profit margins, despite near-term optimism about earnings and anticipated cash benefits from recent legislation.
Analyst Commentary
Recent analyst insights provide a nuanced perspective on Upbound Group's performance and prospects. While some analysts have expressed growing optimism, noting tangible drivers for near-term upside, others remain attentive to lingering challenges that could temper sustained outperformance. Below is a summary of the key positive and cautious takeaways shaping current sentiment:
Bullish Takeaways- Expectations of near-term earnings growth have increased, supported by ongoing momentum in the Acima and Brigit segments.
- Upcoming gains from accelerated depreciation provisions in recent legislation are seen as a potential cash windfall over the next few years.
- Valuation at current share levels is viewed as offering a favorable risk-reward profile, with more upside potential than downside risk.
- Analysts signal improved confidence in management’s execution, following recent discussions and business updates.
- Forecasts for revenue growth and profit margins have been revised downward, signaling long-term structural headwinds.
- Concerns remain about the company’s ability to maintain momentum beyond short-term legislative benefits.
- Sensitivity to broader economic fluctuations and increased competition could constrain longer-term valuation upside.
What's in the News
- Mr. Hal Khouri has been appointed as Upbound Group's Chief Financial Officer, effective November 10, 2025. Mr. Khouri brings more than 30 years of experience in financial services and leadership roles at companies including goeasy Ltd., Walmart Canada Bank, and JPMorgan Chase Canada Bank. (Key Developments)
- Mr. Khouri will succeed Fahmi Karam, the current CEO, who has also been serving as CFO since June 2025. Mr. Khouri will report directly to Mr. Karam. (Key Developments)
- Upbound Group has provided sales guidance for the fourth quarter of 2025, expecting same store sales to approach flat to positive results. (Key Developments)
Valuation Changes
- Consensus Analyst Price Target has decreased from $36.38 to $32.38 per share, reflecting a moderate reduction in fair value estimates.
- Discount Rate has risen from 11.54% to 12.32%, which indicates a slightly higher perceived risk in future cash flows.
- Revenue Growth expectations have declined from 6.74% to 5.90%, signaling slightly lower projected top-line expansion.
- Net Profit Margin forecast has edged down from 6.70% to 6.32%, suggesting a modest decrease in profitability outlook.
- Future P/E Ratio has been revised downward from 9.40x to 8.41x, which implies a lower valuation multiple for future earnings.
Key Takeaways
- Expansion through new Acima Credit products and merchant partnerships is set to widen customer base and increase revenue.
- Technology investments and operational streamlining aimed at enhancing customer experience and efficiency may boost profitability.
- Legal and economic challenges, along with competitive pressures and reliance on merchant partnerships, could impact revenue growth and operational costs.
Catalysts
About Upbound Group- Upbound Group, Inc. leases household durable goods to customers on a lease-to-own basis in the United States, Puerto Rico, and Mexico.
- The introduction of the Acima Classic Credit General-Purpose Mastercard and the Acima Private Label Credit Cards, through the partnership with Concora, is expected to expand offerings and financial access for customers, potentially driving increased revenue and customer base expansion.
- Persistent focus on merchant growth, especially with the 10% increase in merchant partners and the addition of notable partners such as Purple mattress and iFIT, is likely to fuel GMV growth impacting revenue positively.
- The integration of the Acceptance Now business into Acima's decision engine is aimed at improving underwriting capabilities, potentially leading to lower lease charge-off rates, impacting net margins positively.
- Investments in technology and digital channels, highlighted by the launch of RecPad and the new e-commerce platform, are expected to enhance customer experience and operational efficiency, potentially boosting revenue and reducing operational costs.
- Rent-A-Center's store optimization and consolidation efforts, including the closure of underperforming stores and enhancement of digital channels, are intended to optimize scale and productivity, thereby potentially improving adjusted EBITDA margins.
Assumptions
How have these above catalysts been quantified?- Analysts are assuming Upbound Group's revenue will grow by 3.9% annually over the next 3 years.
- Analysts assume that profit margins will increase from 1.9% today to 5.8% in 3 years time.
- Analysts expect earnings to reach $278.5 million (and earnings per share of $5.08) by about January 2028, up from $81.2 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting $353.9 million in earnings, and the most bearish expecting $210.3 million.
- In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 10.3x on those 2028 earnings, down from 20.4x today. This future PE is lower than the current PE for the US Specialty Retail industry at 16.3x.
- Analysts expect the number of shares outstanding to grow by 0.06% per year for the next 3 years.
- To value all of this in today's terms, we will use a discount rate of 8.78%, as per the Simply Wall St company report.
Risks
What could happen that would invalidate this narrative?- The ongoing lawsuit filed by Acima leasing against the CFPB could present regulatory and legal challenges, potentially impacting operational flexibility and increasing legal costs.
- A rise in unemployment or deterioration in economic conditions could lead to higher lease charge-offs and delinquencies in both the Acima and Rent-A-Center segments, affecting net margins.
- The competitive landscape may intensify, especially in the e-commerce channel, putting pressure on growth rates and possibly affecting revenue.
- The company's reliance on continued merchant partnership growth for Acima's GMV increases might be at risk if macroeconomic conditions worsen or if competition becomes fiercer, potentially impacting revenue growth.
- Operational challenges in integrating newly acquired stores or partners, particularly relating to optimizing underwriting and account management, could result in increased operational costs and affect net margins.
Valuation
How have all the factors above been brought together to estimate a fair value?- The analysts have a consensus price target of $41.11 for Upbound Group based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $50.0, and the most bearish reporting a price target of just $33.0.
- In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $4.8 billion, earnings will come to $278.5 million, and it would be trading on a PE ratio of 10.3x, assuming you use a discount rate of 8.8%.
- Given the current share price of $30.27, the analyst's price target of $41.11 is 26.4% higher.
- We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.
How well do narratives help inform your perspective?
Disclaimer
AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.