Coach: Analysts Upgrade Retailer To Business Class

| About: Tapestry, Inc. (TPR)
This article is now exclusive for PRO subscribers.

Coach (COH) shareholders have had a tough year. The shares are down some 35% from where they were trading 12 months ago. However, the stock is starting to generate some positive comments and upgrades from analysts. It seems the company is ready to be moved from Coach to at least the Business Section, and the shares should be heading higher from current levels.

Here are several recent positive comments:

  • Citigroup upgraded the shares to "Buy" from "Neutral." It also has a $56 price target on the shares.
  • This follows Macquarie's comments yesterday that the stock's valuation looks attractive at these levels and that the retailer's growth is ready to take off again. The analyst firm has a $60 price target and an "Outperform" rating on the shares.
  • Bloomberg ran an article recently stating that the chances the retailer could be a takeover target given its recent slide have increased.
  • Stern Agee initiated the shares as a "Buy" with a $58 price target last week.
  • Finally, TheStreet reiterated its "Buy" rating on the stock last week as well.

Here are four reasons why Coach should have upside from just over $49 a share:

  1. Analysts have 7% to 8% revenue growth penciled in for FY 2013 and FY 2014, and the stock sports a five-year projected PEG of under 1 (.97).
  2. The company has a robust balance sheet with over $800 million in net cash on the books. The shares also yield 2.5%, and Coach has doubled its payouts over the last two years.
  3. COH is selling at less than 12x forward earnings, a discount to its five-year average (15.3). The company is also seeing rapid revenue growth in two potential future drivers of sales: Men's and China.
  4. The stock has solid long-term technical support at just under these levels (see chart).

(Click to enlarge)

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in COH over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.