Sell Rating on European Wax Center Due to Strategic Uncertainty and Challenging Consumer Environment

Morgan Stanley analyst Simeon Gutman maintained a Sell rating on European Wax Center (EWCZ – Research Report) yesterday and set a price target of $4.00.

Simeon Gutman has given his Sell rating due to a combination of factors affecting European Wax Center’s current and future performance. Despite better-than-expected Q1’25 results, which were influenced by temporary factors such as the Easter shift and franchisee spending adjustments, the company is still in the early stages of its strategic initiatives. These initiatives include refining marketing strategies, redefining the target guest, and upgrading site selection, but there is limited visibility on their long-term success.
Additionally, the consumer environment remains challenging, and tariffs add uncertainty, potentially hindering new guest acquisition. Gutman maintains a $4 price target, reflecting a significant discount to the company’s long-term valuation multiple due to slowing unit growth and uncertain progress on strategic initiatives. The risk/reward profile is seen as negative, with substantial downside potential compared to upside, reinforcing the Sell rating.