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Conns Inc. Message Board

  • kenji100 kenji100 Feb 21, 2014 1:33 AM Flag

    Credit analysis from Keybanc analyst

    He is laying out both the positives and negatives, but take it with a grain of salt, this guy was saying price target of $86 a day ago.

    In the view of analyst Bradley B. Thomas of Keybanc, the major issue was about credit.

    "Conn’s, Inc. (CONN-NASDAQ) pre-announced 4Q results today that were strong on the retail side, but disappointing on the credit side," said Thomas. "On the retail side, comps increased 33.4% (vs. our 26% estimate) and retail gross margins were 40%, up over 400 bps. New stores are performing well, and we believe CONN's new marketing initiatives remain a driver of traffic. On the credit side – which will likely be the focal point for the stock today – the 60+ day delinquencies rose 30 bps sequentially to 8.8%, up 170 bps year-over-year. The Company is raising its expectations for charge-offs and delinquencies for 4Q and 2014. The new 2014 guidance of $3.40-$3.70 per share is down from $3.80-$4.00 previously, but still implied attractive growth if it is achieved."

    "We believe the major questions today will be about credit. First, how bad could credit losses go from here? Second, can CONN still be a growth story if it has to tighten? The magnitude of the credit issue is difficult to answer today. For perspective, we estimate that every 1% increase in provision for bad debt would hurt 2014 EPS by $0.20, so there could be further risk to guidance if management has not forecast appropriately. On the other hand, we remind investors that Conn's is making 40% gross margins at retail today, up from 25% in 2009, which can cushion higher losses in the context of overall company profitability," he added.

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    • Keybanc just told everyone to get long at these levels here.

    • All stocks have their inherent risks, but the downside risks of CONN just became very small in comparison to the upside potential. I loaded half my boat up with CONN yesterday in the 32.30's. I don't see any reason why CONN trades at less than $40/share in the next 3-4 weeks, and I personally think it will be trading back in the 50's within a quarter. Their Q4 results alone should boost CONN huge. Yesterday's selling was pure panic, pure emotional selling. Bargain hunters and large institutions will come flocking in soon. GLTAL.

      Sentiment: Strong Buy

      • 1 Reply to johnsonjoel1
      • Yesterday people threw CONN under the bus putting them into the same box as Best Buy .

        But BEST BUY doesn't have this kind of same store growth AND Best Buy doesn't have these kind of margins and it doesn't have this kind of EPS growth..........but the STREET shoots firsts and asks questions yesterday the Street shot CONN .

        Earning $3.40 - $3.70 our forward P/E is now below $40 a share our P/E is still only 11.7
        So our growth rate is appx. 3 times our P/E .......for high growth companies its a common practice to have your P/E at TWICE your growth rate.......


        bottom line - Downside risk limited / Upside potential very big

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