Acushnet, Signet Jewelers Downgraded After Hitting Nomura's Price Target

After Acushnet Holdings Corp GOLF and Signet Jewelers Ltd. SIG reached Nomura's price targets, the sell-side firm downgraded the retail stocks Tuesday.

The Analyst

Analyst Simeon Siegel downgraded Acushnet from Buy to Neutral and maintained a $25 price target. The analyst downgraded Signet from Buy to Neutral and maintained a $62 price target.

The Thesis

After outpacing the S&P 500 over by nearly 20 percent over the last 12 months, with a 33-percent gain for Acushnet vs. 13 percent for the S&P500, Siegel said he's  going to wait in the clubhouse before becoming more constructive on one of the leading brands in golf. (See the analyst's track record here.)

“We continue to recognize GOLF’s brand equity and expect its leadership position to persist, however with recent multiple expansion we move to the sidelines on valuation."

An uptick in retail sales is coming from AUR as opposed to traffic, the analyst said: tighter inventory industrywide is resulting in less surplus product to drive a promotional war Siegel said has been "raging" since the Great Recession.

After Signet Jewelers shares posted a 40-percent run-up since the first quarter and hit Nomura's price target, Siegel said the stock looks fairly valued.

“SIG’s stabilization is being rewarded, and although management initiatives should continue to bear fruit, we believe that with 4Q EPS expected to represent greater than 100 percent of the FY EPS guide, shares appear fairly valued at current levels, given the uncertainty around the holiday season and a more reasonable valuation multiple.”

Price Action

Signet Jewelers shares were set to close down 6.16 percent at $57.89 at the time of publication Tuesday afternoon, while Acushnet shares were down 2.07 percent at $24.16.

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