With core business clearly
deteriorating, Abercrombie & Fitch Co. (NYSE: ANF) bulls have been shifting their attention to recent market buyout rumors.
Unfortunately, the M&A route may be a dead-end for Abercrombie as well, Morgan Stanley analyst Kimberly Greenberger said.
Abercrombie just reported a wider-than-expected $0.91 per share loss in fiscal fourth quarter, and Greenberger said there is no
reason for optimism that the company can turn around its business anytime soon. Morgan Stanley cut its Q2 EPS estimates from -$0.19
to -$0.39. The firm now expects a full-year EPS loss of $0.02 compared to its previous estimates of +$0.30.
Abercrombie shares were seen down 6.33 percent in Friday trading and are now down 37.64 percent over the past 12 months, the
stock will likely continue to trade based on M&A rumors in the near-term, Greenberger stated.
Related Link: Amid Takeover Reports,
Abercrombie & Fitch Flies On Eagle's Wings
Rumors Swirl, But Greenberger Stays Skeptical
Earlier this week, the Wall Street Journal
reported that Cerberus Capital Management and American Eagle Outfitters (NYSE: AEO) are working on a potential buyout bid for Abercrombie. However, a takeover
would be a questionable move, Greenberger said.
“While we see the strategic rationale in a merger of equals (reducing promotional impressions in the market, corporate
headquarter savings, etc.), a takeout of the company at a premium would be highly risky, in our view.”
At this point, the value of Abercrombie’s brands has already been damaged. In addition, Abercrombie currently has an equity
value of around $930 million compared to roughly $3 billion in debt.
Morgan Stanley maintains an Underweight rating on Abercrombie and a $9 price target for the stock.
Latest Ratings for AEO
Date |
Firm |
Action |
From |
To |
Apr 2017 |
B. Riley |
Downgrades |
Buy |
Neutral |
Mar 2017 |
Bank of America |
Downgrades |
Buy |
Neutral |
Jan 2017 |
Buckingham |
Initiates Coverage On |
|
Neutral |
View More Analyst Ratings for
AEO
View the Latest Analyst Ratings
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