DA Davidson: Buy Canada Goose On Tariff Overreaction

The Canada Goose Holdings Inc GOOS sell-off is overdone, according to one analyst.

The Analyst

DA Davidson's John Morris maintains a Buy rating and a $42 price target on Canada Goose.

The Thesis

Morris sees a buying opportunity in Canada Goose in the wake of the U.S.-China trade and currency war.

“Still in its early growth phases globally, Canada Goose has less exposure currently to demand from the Chinese consumer than most luxury goods brands,” he wrote in a note.

Morris says China’s move to let its currency drift lower in response to the U.S. move to impose additional tariffs could begin to impact overall Chinese consumption through currency impact. However, Canada Goose derives less than 10% of revenues directly from the Chinese consumer, compared to 30%-40% for most luxury goods brands, he said.

“Canada Goose just opened its first store in China just about a year ago and should have about five stores in the country this year. Note that, as a Canadian based company, GOOS has minimal exposure to U.S. tariffs on its sourcing from China,” he said.

Morris sees positive read-throughs for Canada Goose, by using Moncler S P A/ADR MONRY's first-half results as a proxy, after the company exhibiting better-than-expected top-line and margin performance.