JPMorgan Upgrades Boot Barn, With 45% Upside Expected

Macro and micro headwinds facing Boot Barn Holdings Inc BOOT could turn to tailwinds, according to JP Morgan. 

The Analyst 

JP Morgan analyst Matthew Boss upgraded shares of Boot Barn from Neutral to Overweight and increased the price target for the shares from $9 to $17, suggesting 45 percent upside from current levels.

The Thesis

When CEO Jim Conroy and other Boot Barn executives met with JP Morgan, their tone exuded confidence in top-line stability, with the company reporting positive comps in five of the past six quarters, Boss said. (See Boss' track record here.) 

The confidence in top-line growth stems from a trio of factors, including mature market stores consistently comping in the 2-4 percent range, sequential improvement in oil/gas markets for the past two years and e-commerce turning to a tailwind in the second-half of 2017, the analyst said. 

See also: Soft Holiday Sales On The Cards? Target's Q4 Forecast Says So

JP Morgan projects that the inflection in e-commerce trends will translate to "a low- to mid-single digit same store sales story."

Boot Barn has strengthening the balance sheet, acquiring three of the top 10 competitors in the fragmented $20 billion Western Wear market, and built infrastructure to re-accelerate organic unit growth to 10 percent, Boss said.

These catalysts, according to JP Morgan, will help Boot Barn return to annual mid-teens EBITDA growth and a 20 percent-plus bottom-line algorithm.

Boot Barn reported reported second quarter earnings after the close Nov. 2, with an EPS of 4 cents against 2 cents in the prior year period and sales of $143.1 million. The company also raised its fiscal 2018 EPS guidance from 52-57 cents to 57-61 cents. 

The Price Action

At the time of writing, Boot Barn shares were rallying 6.42 percent to $12.44. 

Photo by Carl Fleischhauer/Courtesy of Wikimedia.