Credit Suisse Says Canada Goose Stock Pressure Appears Overdone

Canada Goose Holdings Inc GOOS shares plummeted around 22 percent over the past two weeks on news of possible delays in the launch of its Beijing store amid political tensions, according to Credit Suisse.

The Analyst

Analyst Michael Binetti maintains an Outperform rating on Canada Goose with an unchanged CAD $100 ($74.62) price target. 

The Thesis

Media reports suggest that tensions between Canada and China resulted in a boycott of the brand in China, and more recently a delay in the opening of Canada Goose’s Beijing flagship store.

Although it's unclear when these political tensions may ease, there’s “no fundamental change” in the company’s Chinese opportunity and no change in the “intrinsic value of the brand,” Binetti said in a  Monday note. 

Canada Goose’s earnings power is strong, and the company could record EBITDA margins of 27.3 percent by year's end, the analyst said. 

Trends remain strong quarter-to-date, and the outerwear company holds upside to the Street’s estimates for Q3 and fiscal 2019, Binetti said.

Although the news reports from China have resulted in some near-term uncertainty, this neither overrides the long-term opportunity for the brand nor does it overrule the high demand from Chinese consumers that was visible during store checks, according to Credit Suisse. 

Price Action

Canada Goose's U.S.-traded shares were down 2.54 percent at $50.76 at the time of publication Monday. 

Related Links: 

Susquehanna Bullish On Canada Goose: 'We Foresee A Long Runway For Margin Expansion'

Canada Goose Heats Up After Q2 Sales Beat: A Sell-Side Roundup