Analysts at Credit Suisse, led by Michael Binetti, after Monday's market close initiated coverage on a plethora of apparel and retail names.
Here's a summary of the bull and bear calls from the team of analysts.
The Bull Calls
- Tapestry Inc TPR initiated at Outperform, $60 price target.
- Michael Kors Holdings Ltd KORS initiated at Outperform, $75 price target.
- Estee Lauder Companies Inc EL initiated at Outperform, $162 price target.
- Tiffany & Co. TIF initiated at Outperform, $120 price target.
- Canada Goose Holdings Inc GOOS initiated at Outperform, C$52 price target (TSX-listed stock).
- Lululemon Athletica inc. LULU initiated at Outperform, $96 price target.
- Burlington Stores Inc BURL initiated at Outperform, $146 price target.
- Ross Stores, Inc. ROST initiated at Outperform, $88 price target.
- Kohl's Corporation KSS initiated at Outperform, $72 price target.
- Nike Inc NKE initiated at Outperform, $78 price target.
- Foot Locker, Inc. FL initiated at Outperform, $50 price target.
- VF Corp VFC initiated at Outperform, $85 price target.
- Ralph Lauren Corp RL initiated at Outperform, $125 price target.
- Ulta Beauty Inc ULTA initiated at Outperform, $245 price target.
Tapestry
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Tapestry, the parent company of Coach and Kate Spade, accounts for 40 percent of the premium accessories market and continues to take "huge steps" to improve further.
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EBIT upside will likely come from Kate brand growth and management's revision of cost synergies from $50 million to $100 million.
Michael Kors
- Consensus estimates are too low and doesn't reflect the improving macro environment and the company's encouraging footage growth.
- Negative trends like over-discounting and operating underperforming stores have been fixed and should generate multiple quarters of "negative-but-improving" same-store sales.
Estee Lauder
Estee Lauder's "powerful portfolio transformation" leads to confidence in the company's 6 to 8 percent revenue growth trajectory.
Estee Lauder's 16.5 percent margins have upside to match rival L'Oreal Luxe who boasts a 19 to 20 percent adjusted EBIT margin.
Tiffany
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Tiffany's most recent earnings report showed the company had the "most product newness in years.
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Consumer response so far to Tiffany's products may signal its new strategy is working and resonating well.
Canada Goose
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Canada Goose's market share in the $11 billion premium outwear market stands at just 6 percent and implies a "substantial untapped global opportunity" ahead.
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Canada Goose's large opportunity ahead implies it can grow its EPS "well above" the company's own 20 percent target.
Lululemon
- The Street's forecast of just 5 percent same-store sales growth remains below the company's current momentum, for example same-store sales in the third quarter rose 7 percent.
- New stores in Asia are generated a sales per square foot ratio that is 5 to 10 percent above the total fleet average.
Burlington Stores
- Burlington Stores can narrow its sales per square footage gap versus its peers at $130/foot versus $310+/foot.
- Tax savings could add 1.5pp to sales/foot in 2018 while a better inventory management should add incremental upside.
Ross Stores
- Ross Stores' consistent double-digit EPS growth, same-store sales outperformance, margin improvement, and stock buybacks should help the company reach Street estimates for 2018.
- The company is also "one of the clearest long-term reinvestment opportunities."
Kohl's
- Kohl's fourth quarter same-store sales growth of 6.3 percent was its first quarter of positive traffic since 2015.
- The encouraging quarter should give investors better conviction that ongoing initiatives can result in sustainable sales and margin growth.
Nike
- Nike's revenue growth woes likely bottomed and should now grow at a high-single digit rate by fiscal 2019.
- Nike will see momentum from international strength now accounting for 55 percent of total sales which is growing at 12 percent.
Foot Locker
- Foot Locker could benefit from a much needed push from market leader Nike to bolster its innovation.
- Investors are being "paid to wait" with a 3.12 percent dividend yield ahead of a "high-conviction improvement" in the second half of 2018.
VF Corp
- VF is best positioned to navigate through any softline challenges, including M&A deals and on-trend fashion.
- The Street's estimates aren't including margin growth and upside to 20 percent EBIT margins.
Ralph Lauren
- Ralph Lauren's analyst day in June should "pave a path" towards positive revenue trends and the stock will undergo a "catch-up trade."
- Margins for Ralph Lauren's retail partners should turn positive in the third quarter, which marks a "necessary condition" to restart its wholesale growth.
Ulta Beauty
- Ulta Beauty is among the few that operates a high-growth retail business and its industry-leading same-store sales could continue coming in at or above its 7 to 9 percent target.
- The stock is "mispriced due to concerns" about the competitive environment but the company boasts multiple margin levers.
The Bear Calls
- J C Penney Company Inc JCP initiated at Underperform, $2.50 price target.
- Finish Line Inc FINL initiated at Underperform, $9 price target.
JC Penney
- Recent encouraging comp drivers could slow, including appliances, beauty and Home.
- The company will see "almost no tax savings" which puts it at a disadvantage versus competitors who have incremental cash to reinvest in their growth initiatives.
Finish Line
- Finish Line's stock is trading at a 13.1 times NTM Street EPS valuation which already prices in EPS growth from tax savings and margin normalization.
- Finish Line faces a higher risk of store closures at 29 percent versus 16 percent for Foot Locker.
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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