Morgan Stanley has moved European Wax Center (NASDAQ:EWCZ) off its Underweight list, elevating the stock to Equalweight and raising its price objective to $5.80 from $3.75. The brokerage firm cited the definitive agreement for an all-cash sale to private equity firm General Atlantic as the primary catalyst behind the change, with the new target closely matching InvestingPro's Fair Value assessment for the company.
The takeover will see General Atlantic acquire the outstanding shares it does not already own for $5.80 per share in cash, in a deal that places the company's equity value at approximately $330 million. General Atlantic currently holds about 42% of the stock and will purchase the remainder at a price representing a 45% premium to European Wax Center's closing price on February 9, 2026. The special committee charged with evaluating the transaction approved the arrangement unanimously, and the deal is expected to close in mid-2026.
Market participants are weighing the transaction's implied valuation metrics. The deal implies an enterprise value near $643 million, which corresponds to an EV/EBITDA multiple of roughly 9x using Street estimates for EBITDA of about $73 million for 2025 and $74 million for 2026. InvestingPro data shows the company's last twelve months (LTM) EBITDA at $73.87 million and a current EV/EBITDA multiple of 7.95x.
Underlying the valuation discussion are the company's unit economics. Recent quarters have shown notably high gross profit margins, with InvestingPro reporting a margin of 74.1%. That margin profile, combined with the planned buyout terms, appears to have influenced Morgan Stanley's repositioning and price-target adjustment.
The market reaction ahead of the closing timetable was pronounced. European Wax Center's shares jumped sharply in recent trading, posting a one-week gain of 45.18% and a six-month gain of 36.19% prior to the announcement of the definitive agreement. Investors have been responding to a mix of the buyout news and recent operational updates from the company.
Operational and financial context provided by the company and sell-side analysts adds nuance to the picture. European Wax Center reported 20 net center closings in fiscal 2025, a pace below its earlier projection of 23 to 28 net closings, with management attributing the shortfall to strategic development decisions. The company also reported liquidity strength, with a current ratio of 3.67, indicating that near-term liquid assets exceed short-term obligations.
In quarterly results referenced alongside the transaction, revenue outperformed expectations, with third-quarter top-line sales of $54.2 million versus a forecast of $52.26 million. However, the company missed on reported earnings per share, delivering $0.09 versus an expected $0.12. Despite that earnings-per-share shortfall, revenue strength contributed to positive investor sentiment in recent sessions.
Not all broker commentary has been uniformly bullish. Truist Securities lowered its recommendation on European Wax Center from Buy to Hold, while aligning its price target to $5.80. Truist analyst Scott Ciccarelli highlighted a shift in customer behavior as a concern, noting pressure from less frequent guests even as demand among core customers remains strong.
The acquisition proposal and associated analyst actions create a clear timeline for shareholders and market observers. General Atlantic's offer of $5.80 per share for the outstanding class A common stock it does not already own is the mechanism by which the company would be taken private, subject to customary closing conditions and the mid-2026 timetable previously disclosed.
For investors and industry watchers, the transaction and subsequent analyst rating changes touch multiple market themes - private equity activity in consumer services, valuation multiples relative to EBITDA, and the resilience of unit-level economics in branded service franchises. The Special Committee's unanimous approval and the premium offered to public shareholders set the parameters for the coming months as the deal moves toward completion.