Pacific Sunwear of California Inc. shares jumped Wednesday after a Piper Jaffray analyst upgraded her rating on the retailer's stock.
THE SPARK: Analyst Stephanie Wissink lifted Pacific Sunwear shares to "Overweight" from "Neutral." She said that a Piper Jaffray survey of teenagers showed that the retailer's appeal with its key demographic may be improving.
THE BIG PICTURE: Pacific Sunwear specializes in surf- and skate-inspired clothing that sell the concept of a California way of life. But demand for its products has weakened amid the still bumpy economy and changing teen tastes. The company recently posted its sixth-straight annual loss.
The Anaheim, Calif., company has been closing less profitable stores. Its loss narrowed in its most recent quarter, which ended Feb. 2. Still, it expects another loss in the current quarter, and analysts predict annual losses this year and next year.
THE ANALYSIS: Wissink said Pacific Sunwear's latest clothing offerings are helping it gain back teen customers. She said the chain is transitioning to selling more fashionable clothing from its traditional focus on action sports gear. That's important because she sees demand for such clothing nearing its peak.
Given better market share trends and the company's recent reorganization, she thinks Pacific Sunwear may post an annual profit in the year ending in January 2015. She had previously predicted a loss for that year. She still expects a loss for this fiscal year, which runs through January 2014.
SHARE ACTION: Shares jumped 19 cents, or 8.4 percent, to $2.44 in afternoon trading. The company's stock is near the upper end of its 52-week trading range of $1.17 to $2.73. Shares have risen more than 50 percent in the past 12 months.