Baird Names Canada Goose A 'Fresh Pick' Ahead Of Q3 Print

Canada Goose Holdings Inc GOOS shares have experienced a significant pullback since early December, when they nearly reached $70. 

Despite some late-cycle valuation risk later in the year, a new report from Baird Equity Research names the company as a "Fresh Pick" in the near-term.

The Analyst 

Jonathan Komp maintained a Neutral rating on Canada Goose and raised the price target from CA$70 ($53.28) to CA$75 ($57.08). 

The Thesis:

After downgrading Canada Goose to Neutral in August, Komp said in a Monday note that he's been waiting for a better entry point and/or greater confidence in upside to estimates.

That time may finally have come after seeing widespread stockouts of Canada Goose products across company-owned sites and key wholesale partners globally, the analyst said. 

“We believe more tempered near-term sentiment for GOOS has yielded a compelling opportunity." 

The analyst is adding a Fresh Pick designation on Canada Goose through Feb. 28. The company is expected to report third-quarter earnings the week of Feb. 11. 

Fears of Chinese and Canadian political tensions have weighed on shares recently, but the apprehension is so far unfounded, Komp said. 

“In many ways, the current setup reminds us [of] the inverse of last year, when elevated expectations resulted in a sell-the-news reaction to FQ3 results." 

Although Canada Goose has one of the highest valuation metrics in Baird’s coverage, the analyst said the company is very difficult to directly compare to other publicly traded peers given that it's in the early stages of what he expects is a substantial long-run growth opportunity. 

“Over time, we believe the company can leverage its brand strength and other unique drivers to support attractive targeted growth that includes revenue up 20-percent-plus and EPS up 25-percent-plus over the next three years,” Komp said. 

Price Action:

Canada Goose shares were up 2.85 percent at $54.40 at the time of publication Tuesday. 

Related Links:

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

Credit Suisse Says Canada Goose Stock Pressure Appears Overdone