Columbia Sportswear's Stock Trading At 'Balanced' Valuation, Analyst Says

Up nearly 30 percent year-to-date, the bullish case for Columbia Sportswear Company COLM no longer applies, according to DA Davidson.

The Analyst

DA Davidson's Michael Kawamoto downgraded Columbia Sportswear from Buy to Neutral with an unchanged $96 price target.

The Thesis

Columbia Sportswear's multiple apparel brands are resonating well with consumers and the company's revenue growth guidance for 2018 of 8 to 10 percent is reasonable, Kawamoto said in a note. The stock's momentum since the start of the year, however, has pushed its valuation from 19.7 times next 12 months P/E to 27.8 times and is now trading notably above its five-year average.

Columbia Sportswear's second quarter results (scheduled for July 26) are typically the seasonally lightest of the year, the analyst said. The company also faces a lack of any notable catalyst until the weather changes in the fall. Kawamoto said the company needs to show investors a good start to the winter season and estimates need to move higher for the stock to warrant its current valuation.

Favorable outcomes of multiple initiatives, including Project Connect, are unlikely to be seen until 2019 although current expectations imply "substantial" benefits. As such, investors may want to consider sitting on the sidelines given no near-term catalysts.

Price Action

Shares of Columbia Sportswear were trading around $92.25 at time of publication..

Related Links:

This Small Olympic Outfitter Outperformed Nike And Under Armour

From Planet Fitness To Camping World, BofA Picks Lifestyle Brands Likely To Benefit From Tax Reform