Coach gets beat up some more


Coach (COH -3.8%) trades lower after Sterne Agee takes a dour view on the luxury retailer.

The investment firm takes its rating down to Neutral from Buy and drops its price target by $10 to $41 off of concerns the brand has been tarnished.

An early check on Q2 sales trends doesn't indicate a large turnaround is in place, notes Sterne Agee.

Shares of Coach are down 31% YTD.

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Comments (32)
  • kleemc
    , contributor
    Comments (112) | Send Message
     
    Coach has been beaten down so badly that it's now presenting good value, even if we assume it's turnaround effort is going to take a long time. I'm buying this puppy at current price and will be happy to hold it for at least 5 years.
    4 Jun 2014, 09:55 AM Reply Like
  • seattler0cks
    , contributor
    Comments (5) | Send Message
     
    > The investment firm takes its rating down to Neutral from Buy and drops its price target by $10 to $41 off of concerns the brand has been tarnished.

     

    A little late to the party . . .
    4 Jun 2014, 09:56 AM Reply Like
  • Willow Street Investments
    , contributor
    Comments (2108) | Send Message
     
    Analysts are worthless. Where can I sign up for that job? Put out repeated buy recommendations for stocks at 52 week high momentum stocks and sells when stocks are at 52 week lows.

     

    I remember when HPQ was at 11 down from 50 and one analyst said it had a -$2 value. Its now 34. Analysts are criminals shaking out weak hands. I would bet they would have a buy on COH if investment banking opportunities were possible.
    4 Jun 2014, 10:46 AM Reply Like
  • csbosox
    , contributor
    Comments (66) | Send Message
     
    I bought more.
    4 Jun 2014, 10:57 AM Reply Like
  • SkipK
    , contributor
    Comments (1501) | Send Message
     
    I started going long COH in the mid 40's and bought more at 52 week lows. It's a classic value opportunity and for COH to be available at a 3.3% yield is indeed rare. I did not buy a full position (like I did with TGT) buy it's enough to matter.

     

    Buying when others are fearful is tough. But that's when money is made.

     

    As to the comments above about analysts, I could not agree more. What a bunch of clowns.
    4 Jun 2014, 01:57 PM Reply Like
  • Willow Street Investments
    , contributor
    Comments (2108) | Send Message
     
    I bought COH at 48, 43.5 and almost bought more but am a little afraid I have to say. Reminds me of when I bought SBUX at 18 (it was down from 40), then I bought at 16 and then doubled down at 7. Its now 70, but the way "analysts" were talking then you would have thought they were going out of business.

     

    P.S. I bought AAPL in 1996 at 6 dollars a share (too bad I sold it all in 2007), but I can guarantee you no "analyst" then would touch it.
    4 Jun 2014, 02:09 PM Reply Like
  • SkipK
    , contributor
    Comments (1501) | Send Message
     
    Thanks for sharing choiminshik. I'm happy that you're in COH too as I value your experience.

     

    That's some good buys you made of SBUX and AAPL? I only bought SBUX recently and sold calls rather OTM on them. I bought AAPL in the mid $400's and intend to hang on until the split.

     

    Are you buying anything else these days? I have also been buying TGT.
    4 Jun 2014, 02:59 PM Reply Like
  • Willow Street Investments
    , contributor
    Comments (2108) | Send Message
     
    I sold some HSH I bought in early February for 34.95 at 52, but it has run up to almost 60! I almost bought more and had an order in early may for 200 more shares! Oh well.

     

    I bought BAX at the end of last year at 66 and that is doing okay. I bought FAST earlier this year (my speculative pick) at 42.95 after seeing a lot of insider buying noted in Barrons. I bough DGX at 54 earlier this year and GIS at 46.95 earlier this year. These were all for my IRA.

     

    I have my eye on PDCO right now, but haven't bought. I would like to see the market retreat from its highs.

     

    COH is my big dog right now. I don't mind it going down but it has been down every day for several weeks now.
    4 Jun 2014, 03:08 PM Reply Like
  • SkipK
    , contributor
    Comments (1501) | Send Message
     
    Thanks choiminshik.
    Interesting, as I noticed BAX and FAST too. I however sold cash secured PUTS on both as I wasn't sure. Both doing okay of course. Also bought GIS at your price, and then some more in the 50's.

     

    I think COH will take at least a year to shake out. In the meantime we get a 3% yield. I intend to hang on and not look at it every day.
    4 Jun 2014, 06:47 PM Reply Like
  • Willow Street Investments
    , contributor
    Comments (2108) | Send Message
     
    Yes, your COH advice seems sound. Right now, every one is against it. That is Wall Street's way. They love something and then they hate it. It happens to every stock and it will happen to Google and Apple eventually.
    4 Jun 2014, 08:22 PM Reply Like
  • Kingkang
    , contributor
    Comments (176) | Send Message
     
    choiminshik, if you have the experience with SBUX and AAPL then why afraid? I don't understand your logic.

     

    Disclosure: Long COH
    4 Jun 2014, 02:57 PM Reply Like
  • Willow Street Investments
    , contributor
    Comments (2108) | Send Message
     
    Well, I was younger then. Plus the bombardment of these stories do get to you afetr awhile. My COH purchase is getting to me because it has been going down every day for about 6 weeks now. I just want to see it stabilize. Its been kind of a blood bath.
    4 Jun 2014, 03:09 PM Reply Like
  • fendermon
    , contributor
    Comments (834) | Send Message
     
    @chom

     

    Drip your divi if you can..to ease the pain.
    5 Jun 2014, 06:37 AM Reply Like
  • Willow Street Investments
    , contributor
    Comments (2108) | Send Message
     
    Thanks. Yes, I will do that. I do that on all my stocks. You would think a 3.4% dividend yield would support COH at this point but who knows?
    5 Jun 2014, 07:52 AM Reply Like
  • Fanebrb
    , contributor
    Comments (660) | Send Message
     
    COH is the best buy ever and better than Best Buy!
    4 Jun 2014, 05:14 PM Reply Like
  • Rudester
    , contributor
    Comments (3323) | Send Message
     
    Damn, I started building a position in COH last week, thinking it was near the bottom...I was wrong.
    4 Jun 2014, 06:39 PM Reply Like
  • student23
    , contributor
    Comments (88) | Send Message
     
    just remember everyone who is buying COH what happened to Lululemon: same hope on a turnaround, yet the stock still hasn't made a significant rebound and is down hard from 82 to 43. The same thing could happen to COH and it could easily go to $35. Remember that we're at 1928 for S&P: any small pullback could hurt COH even more. Be cautious.
    4 Jun 2014, 06:59 PM Reply Like
  • Willow Street Investments
    , contributor
    Comments (2108) | Send Message
     
    Not a good comparison. LULU was a high priced momentum story stock. COH is not a momentum stock anymore and it has been beaten up quite a bit already for years now.
    4 Jun 2014, 08:20 PM Reply Like
  • SkipK
    , contributor
    Comments (1501) | Send Message
     
    student,

     

    I agree with chominshik. LULU was clearly a momentum stock. COH is a value play with superb metrics (balance sheet quality, ROE, FCF).

     

    We're in good company in owning COH. Dodge and Cox, and, Olstein Value, two high quality mutual funds have been buying COH, and their holding cost is in the high 40 - low 50's.

     

    COH might go down to $35 (there's no telling Mr. Market's moods), but it will see $60 in 12 - 18 months. That's a good return along with the 3% dividend.

     

    Where I do agree with you is that a major S&P pullback will have a large impact on COH. While difficult for me, I do however try to remember not to confuse price with value. COH is a $60 value to me.
    4 Jun 2014, 11:24 PM Reply Like
  • fendermon
    , contributor
    Comments (834) | Send Message
     
    Right on Skip. COH has zero debt I believe. They would almost have to TRY to completely ruin a business of this caliber, and with a 70 plus gross margin. I just moves a little KORS into COH. The price spread between them is way out of hand.
    5 Jun 2014, 06:44 AM Reply Like
  • Willow Street Investments
    , contributor
    Comments (2108) | Send Message
     
    I heard yesterday they took on 200 million in debt recently because most of their money is overseas.
    5 Jun 2014, 07:53 AM Reply Like
  • fendermon
    , contributor
    Comments (834) | Send Message
     
    Good to know...thanks
    5 Jun 2014, 11:29 AM Reply Like
  • frankiethepunk
    , contributor
    Comments (301) | Send Message
     
    Boo hoo the lemmings are running off the cliff.
    4 Jun 2014, 11:20 PM Reply Like
  • Willow Street Investments
    , contributor
    Comments (2108) | Send Message
     
    You are a class act. Your comment has zero value.
    5 Jun 2014, 03:48 AM Reply Like
  • NY2LA 1
    , contributor
    Comments (1388) | Send Message
     
    COH has been a generational brand with global footprints, Lulu is a fad niche player. How can one even compare the two.
    4 Jun 2014, 11:38 PM Reply Like
  • student23
    , contributor
    Comments (88) | Send Message
     
    Skip,

     

    While I don't see how you came up with $60 which is a MASSIVE upside from its current level, I am declined to buy a lot of those beaten up names, like ebay or lulu... I mean it's not like coach had a good quarter and then still sold-off... it had a horrible quarter.. while I do agree that it could be a candidate for a short-term bounce in the low 40's, I just don't see any logical scenario, where all of a sudden, new initiatives are going to drive sales higher and the stock goes back to the mid 50's and all the shareholders will live happily ever after... look at other retailers who are getting cheaper every day ( Pier1, Bed Bath & Beyond...) and are still not rebounding... I remain on the sidelines.
    5 Jun 2014, 03:45 PM Reply Like
  • Willow Street Investments
    , contributor
    Comments (2108) | Send Message
     
    You will not see it because it will happen before you realize it is happening. When I bought AAPL in 1996 at $6, no one knew an iPhone was coming or an iPod. When I bought SBUX in 2008 at $7 a share, no one knew a comeback was in the making. You are never going to know as an individual investor. You are going on gut instinct and a general review of the financials and that is about it. If you are waiting for a signal from COH as to their future plans you will have missed the boat. Waiting for Wall Street to like a stock again is a fools game.
    5 Jun 2014, 04:10 PM Reply Like
  • SkipK
    , contributor
    Comments (1501) | Send Message
     
    Student,

     

    fair question.

     

    I'll answer in two parts.

     

    Quantitative: Per FAST, COH is expected to have lower EPS next year at $2.83. The average PE ratio for COH is 19.3 (10 year average) to 23 (15 year average). Let's be conservative and say PE of 19. Multiply PE of 19 by $2.83 and you're at $53.77. Market's over react at either extreme so it'll go past $54 once momentum builds. If either EPS or PE moves to the upside from my estimates, then you certainly go past $60. I used similar logic on buying CHRW recently when it hit it's low earlier this year ~$50 and it's now at $60 in a few months (I've already sold calls on this). This type of thinking only works on high quality companies where a turnaround is possible, and likely. I would not use this approach on a CLF or a WLT. Further, a $3% yield acts as a ballast to the stock price.

     

    Qualitative: I don't buy a business just because of the metrics. The business model must be simple and not require heroics to maintain. I believe COH products have a certain under stated class that targets a different type of customer than KORS. COH has growth potential overseas and is getting into other categories likes menswear. It's been in the business for a while and the network effects of a good supply chain, retail outlets and access to designers has value. It met this criteria for me.

     

    I think choiminshik's point is a good one. One the move occurs. it's too late. One has to buy when others are fearful. This means that buying low is difficult.

     

    I remind myself to buy quality at fair prices, versus buying mediocre companies at cheap prices. Consistent dividend growth is a good hallmark of quality. COH seems quality to me. Ultimately, that's a judgement call.
    5 Jun 2014, 09:32 PM Reply Like
  • J.Reda
    , contributor
    Comments (10) | Send Message
     
    I just wonder at what point do the buyout rumors start rolling in.
    5 Jun 2014, 07:04 PM Reply Like
  • fendermon
    , contributor
    Comments (834) | Send Message
     
    COH is a major player and quite healthy; don't know who you think would buy them or why COH would be open to it.

     

    @ choi
    Where did you get the debt info?, thanks
    5 Jun 2014, 09:19 PM Reply Like
  • Willow Street Investments
    , contributor
    Comments (2108) | Send Message
     
    I heard an analyst mention a 200 million dollar loan this week.
    5 Jun 2014, 10:17 PM Reply Like
  • Long Term Value
    , contributor
    Comments (194) | Send Message
     
    This price is looking good - seems some may be giving up. That is of interest :)
    12 Jun 2014, 02:55 PM Reply Like
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