What Happened?
Shares of residential swimming pool manufacturer Latham (NASDAQ: SWIM) fell 7.6% in the afternoon session after William Blair analyst Ryan Merkel downgraded the stock to Market Perform. According to StreetInsider, Merkel cut Latham to Market Perform from Outperform. He set his 2027 EBITDA estimate at $112 million, 12% below consensus, on softer sales and margin pressure. He expects the new-pool market to shrink again in 2027 as high interest rates curb spending on large home projects, and he flagged freight and fuel costs for shipping oversized fiberglass pools. He said the long-term case for fiberglass pools is intact, but the stock’s valuation could compress toward peers.
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 Latham? Access our full analysis report here, it’s free.
What Is The Market Telling Us
Latham’s shares are very volatile and have had 20 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 biggest move we wrote about over the last year was 2 months ago when the stock gained 26.8% on the news that the company reported better-than-expected second-quarter revenue and raised its full-year sales guidance. The company's quarterly revenue grew 14.4% year-on-year to $197.5 million, surpassing analyst expectations. Buoyed by this performance, Latham lifted its full-year revenue guidance to a midpoint of $610 million, which also came in above estimates. The positive outlook overshadowed a mixed quarter for profitability, as both its GAAP earnings per share and adjusted EBITDA fell short of Wall Street's forecasts. Investors appeared to focus on the strong sales momentum and optimistic revenue forecast, signaling confidence in the company's growth prospects.
Latham is down 5.3% since the beginning of the year, and at $6.00 per share, it is trading 24.9% below its 52-week high of $7.98 from October 2025. Investors who bought $1,000 worth of Latham’s shares 5 years ago would now be looking at only $457.63.
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