Freedom downgrades logistics small cap ArmLogi to ‘hold,’ slashes target price

Freedom Finance has slashed its target price for ArmLogi, one of the fastest-growing warehousing and logistics service providers in the U.S, by 40%. It now recommends holding ArmLogi shares, while it had a “buy” rating on them before. Despite strong revenue growth, the stock has dropped 46% in less than two weeks.

Freedom Finance has changed its recommendation on the logistics company ArmLogi from “buy” to “hold” and slashed its target price from $5 per share to $3 per share. The new target price still implies 50% upside versus current quotes.

ArmLogi’s financial results for the last quarter fell short of expectations, reflecting continued pressure on profitability and liquidity risks, according to Freedom Finance. The investment house believes investors should closely watch ArmLogi’s cost-cutting and warehouse optimization initiatives before purchasing the stock.

Liquidity is another key risk cited by Freedom Finance: Due to high rental expenses, ArmLogi’s cash reserves fell from $10.0 million in the previous quarter to $7.4 million. However, the company has secured $50 million for investments in growth by raising a convertible loan and issuing shares, which, according to Freedom Finance, preserves its strong long-term growth potential.

ArmLogi is a logistics company offering warehouse management and order fulfillment. Its primary clients are cross-border e-commerce merchants looking to establish warehouses in the U.S. The company went public in May 2024, selling 1.6 million shares on the Nasdaq at $5 apiece. Since its IPO, the stock has lost 60% of its value.

In its earnings report for the fiscal-2025 second quarter, alongside solid year-over-year revenue growth of 21.8%, ArmLogi posted a net loss of $1.7 million versus net income of $3.7 million in the previous-year period.

In the 10 trading days since the earnings were released, ArmLogi stock has plunged 46%, including a steep 14% drop yesterday, February 27, that saw it close at $2 per share.

The company's main challenges have been increased shipping rates from its U.S. logistics partner, UPS, as well as underutilization of its new warehouses. ArmLogi’s expenses grew 47.6% compared to the fiscal-2024 second quarter. The management says it will break even next quarter, guiding for net income of $1-2 million. By cutting costs and boosting freight revenue, the company also expects $6 million in net income by the end of the 2025 fiscal year.