Time To Leave This Watchmaker Behind? (MOV)

Brian Sozzi of Wall Street Strategies is out with a research report on Movado MOV recent underperformance of its peer group, including Coach COH, and Tiffany TIF. In the note Sozzi talks about how Movado cut off its money-bleeding retail network last year. He notes that despite the company having failed at having a retail presence, the company could be in for further pain down the line, based off a weak distribution model, and rising input costs. Sozzi notes, "So not only is Movado's cost to produce a watch increasing (materials plus labor), it's against a backdrop of a strategy to introduce lower priced watch lines (such as the Bold) to attract new consumers to the brand." He goes on to talk about the recent weakness in the name. "I believe the relative performance speaks volumes to Movado's distribution challenges, spotty execution on product design, and a cost base that may rise appreciably given structural considerations and the prolific increase in sourcing costs. The valuation on Movado supports my bearish view on the stock. Movado changes hands on a P/E multiple of 38.2x estimated consensus FY12 EPS, or 12.7x EV/EBITDA, aggressive by any stretch of the imagination (relative and absolute)." Movado is most famous for its line of watches that have a single crystal on its face. At last check, shares of Movado were off 2 cents to $14.05.