Why Oppenheimer Upgraded Coach
In a report issued on Monday, Oppenheimer upgraded Coach Inc (NYSE: COH) from Perform to Outperform amid signs of brand stabilization. Oppenheimer's 12-month price target for Coach is $50.
Analysts Anna Andreeva and Janet Knopf wrote, "With Creative Designer Stuart Vevers' influence on full price channel for two quarters and the impact on outlet just getting started this spring, we think we are seeing signs of stabilization of the Coach brand in North America...at 19% operating margins (31% just two years ago) and early signs of brand inflection, COH should benefit from overall growth in handbag category (expected at HSD) while comparisons ease."
Oppenheimer gave four reasons for the upgrade:
1. While Coach has lost market share to competitors in recent years, the slowdown of demand for Michael Kors Holdings Ltd (NYSE: KORS) could provide an opportunity to gain back some of what it lost. The handbag industry is expected to add $1 billion in sales in 2015.
2. New strategies for production. More emphasis on attracting the younger more fashion forward customer by emphasizing smaller styles of its handbags.
3. Promotional activity is expected to decrease with more emphasis on quality of advertisements, not quantity. This should lower expenses and increase EBIT margin, which currently stands at 18.6 percent.
4. The recent acquisition of Stuart Weitzman provides leverage to the company.
Coach closed Monday at $41.71.
Michael Kors closed at $69.71.
Latest Ratings for COH
Feb 2015 | Oppenheimer | Upgrades | Market Perform | Outperform |
Feb 2015 | Topeka Capital | Upgrades | Hold | Buy |
Feb 2015 | Nomura | Maintains | Buy |
View More Analyst Ratings for COH
View the Latest Analyst Ratings
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