Multiple Raised Targets Seeing its recovery “underway and adequately priced in,” CIBC World Markets analyst Mark Petrie downgraded Canada Goose Holdings Inc. to “neutral” from “outperformer,” seeing limited upside after its shares jumped 19.3 per cent in Toronto on Friday with the release of better-than-anticipated quarterly results.
“Though Q2 represents only 20 per cent of annual revenue, we are encouraged by the broad-based recovery underway across product categories and geographies,” said Mr. Petrie. “Canada lags most materially, though we believe this is explained most substantially by a fall off in tourism affecting Toronto stores.”
“Canada Goose is well underway with an intentional strategy to emphasize DTC channels, and both stores and online are showing solid recovery. Store productivity has not fully recovered to prepandemic levels, and likely won’t until next year, but the company is likely to exceed its target of 10 new stores and we expect a similar number next year. Likewise, e-commerce growth of 34 per cent was nicely ahead of our forecast.”
The analyst thinks the luxury clothing company’s 2022 forecast may prove conservative, noting his estimates now sit at the high end of its guidance.
“We also believe GOOS is well positioned vs. peers on supply chain risks,” he said However, we believe the stock is valued on F23 expectations, and here it is more difficult to gain confidence in higher earnings until we gain greater visibility to a tourism recovery. Even still, we believe the company is well positioned to return to 20-per-cent-plus EBIT margins. ”
Mr. Petrie raised his target for Canada Goose shares to $67 from $60. The average on the Street is $60.75.
“While we remain positive about the long-term potential for Canada Goose as a global brand, and see significant near-term growth, we believe this is substantially reflected in shares, particularly after the post-Q2 move,” he said. “Higher growth could justify a higher multiple, though increasing seasonality (due to greater DTC mix) and a general lack of visibility are important counter-points.”
Others analysts making adjustments include:
* Credit Suisse’s Michael Binetti to $70 from $68 with an “outperform” rating.
* Evercore ISI’s Omar Saad to US$70 from US$60 with an “outperform” rating.
* Wells Fargo’s Ike Boruchow to $68 from $52 with an “overweight” rating.
* TD Securities’ Meaghen Annett to $60 from $54 with a “hold” rating.