Our EquityAnalytics department is always updating price targets and ratings on companies that we cover based on new information. Our price targets and ratings are thoroughly researched and use financial analysis tools to determine stock prices. Today we are updating the following companies from our coverage: G-III Apparel (GIII), Lululemon (LULU), PVH (PVH), True Religion (TRLG), Under Armour (UA), and Quiksilver (ZQK).
The chart below shows new ratings, price targets, and buy/sell ranges vs. old ones:
Click to enlarge image.
G-III Apparel: Upgrade From Hold to Buy, Maintain PT at $34
G-III Apparel continues to meet our expectations, and due to recent movement down in the market, the stock is showing a lot of value. The company has a P/E now at 10.45, yet it is expected to see about 20% growth in sales in the next two years. We like the company's lineup of apparel companies with Calvin Klein, Cole Haan, Guess, Levi's, Sean John, and more. Its outlook was in line with our expectations, and we see good growth for the company as well as solid value.
Lululemon: Maintain at Sell, Increase PT From $48 to $50
We believe that Lululemon is still overvalued at its current price and is not a buy right now. We have priced in very solid growth for the company moving forward with operating income expectations going to $650 million by 2016, which is about 100% growth over the next five years. Even with very high expectations and a very minor discount rate, we still see the company as only at $50 price target for next 12 months. Future P/E is over 25 based on our future TTM EPS, and we believe that the company, while seeing great growth, is pricing in all future growth at this point. Overall, we think that Lululemon has created a solid economic moat, but overall, it has priced in a lot of growth. If it misses expectations slightly, we will see more corrections for the company, while a lot of upside growth is already priced in.
PVH: Upgrade From Sell to Hold, Decrease PT From $74 to $71
PVH is looking like a solid Hold at this point after a recent price drop has brought valuations down. We believe the company is a solid apparel manufacturer with a lineup that is fundamentally solid and has some economic moat. We like the Calvin Klein, Tommy Hilfiger, and Heritage Brands, and we believe they all have a lot of staying power and can continue to produce solid earnings for PVH. The company's value has come down to a 10 future P/E, and that is a pretty good place for an entry for PVH. At the same time, we do not see a ton of upside from here. Economic growth is slow and we do not see a lot of opportunities for growth organically that can outperform the market.
True Religion: Upgrade From Hold to Buy, Increase PT From $26 to $35
True Religion is starting to become quite a player in apparel manufacturing, and it has advanced its price target with a combination of dividend and better-than-expected growth for the company. True Religion announced that it is going to be introducing a new dividend with a yield of 2.7%, which is very healthy for a company that is also offering solid growth right now and should be expanding its valuations as earnings grow. We expect the company to grow earnings by around 60% over the next five years, and we believe this estimate is fairly conservative. With solid growth, a great dividend, and upside in earnings, we expect True Religion to definitely be a winner moving forward in 2012. It seems to have gotten past its inventory issues that plagued the company early on.
Under Armour: Upgrade From Sell to Hold, Decrease PT From $62 to $53
After the company's recent stock split and some better-than-expected earnings that show better management of margins than we expected, Under Armour is looking better. Valuations are still sky-high for this company, and we would wait for some more weakness before picking up shares. With a future P/E over 30, we could see some correcting of this stock happen if growth slows. One positive for the company is that we think it still has a lot of potential for growth within its main brand lines as well as in other brands. The company could still see a lot of promise in footwear, woman's apparel, and international growth that is just starting to be tapped. We believe a lot of this is priced in to the stock, so temper your expectations somewhat, but it is a solid growth stock that should be bought on severe weakness that is market-related and not company-driven.
Quiksilver: Upgrade From Sell to Hold, Increase PT From $2.50 to $3
No major changes here. The company should see full profitability in 2012, and it seems to have turned a corner. This stock is still very weak, and until fashion trends move back in the favor of the company, we do not expect to see a ton of upside.Disclosure:
I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.