Barclays: Canada Goose Is Taking Flight

Canada Goose Holdings Inc GOOS stock has jumped 100 percent over the last year, but one analyst thinks the stock’s still just a gosling.

The Rating

Barclays analysts Jim Durran and James Allison maintained an Overweight rating on Canada Goose and raised the price target from the U.S. dollar equivalent of $38.55 to $49.34.

The Thesis

By Barclays’ estimates, China presents a revenue opportunity for Canada Goose that could resemble U.S. sales values. The two countries posted comparable apparel retail sales in 2017.

“We believe we have been sufficiently conservative with our initial earnings forecast, with the China e-commerce platform expected to generate [the U.S. dollar equivalent of $20 million] per year in sales […] and the retail stores to generate $16.9 million to $18.5 million] per year in sales,” Durran and Allison said in a Wednesday note.

Taking the Chinese market expansion into account, the analysts increased their Canada Goose forecast for 2019 and 2020 earnings before interest, tax, depreciation and amortization by 13 percent and 20 percent, respectively.

Barclays expects a 48-percent revenue increase driven by the rollout of Canada Goose's direct-to-consumer channel and "modest" wholesale growth. 

Stronger revenue should spark a 1,054-basis point increase in gross margins that will be partially offset by higher selling, general and administrative expenses, the analysts said. 

Price Action

Canada Goose shares were trading up more than 1 percent at $45.23 at the time of publication Wednesday afternoon. 

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