After stock tumbles 31% last trading on Wednesday, Bank of America downgrades Canada Goose Holdings Inc. to neutral. The percentage decline of the Canadian holding company was its biggest downfall since its initial public offering (IPO) in March 2017.
Analysts from Bank of America showed concern regarding the deceleration of the company’s direct-to-consumer power on its winter clothing and accessories, suggesting a saturation risk. Analysts have slashed their price target from C$93 down to C$54. Despite the price cut, analysts are still hopeful in Canada Goose’s potential in China.
According to Bank of America’s analyst Robert Ohmes, they see how the company’s expansion in China is exceeding expectations. They consider it as the primary risk to the neutral rating they gave.
When it comes to luxury markets, China is leading globally. Canada Goose is participating in the Chinese market with its two stores in Hong Kong and Beijing and possible 3 more store openings planned for 2020. The company also has an e-commerce operation at TMall.
The Canadian holding company’s sales during the fourth-quarter put stocks into a nosedive, falling below what is expected. Analysts from Susquehanna Financial Group recommend to investors to purchase “the weakness.” The Pennsylvania-based financial group company gave a positive rate to Canada Goose’s stock, but still, slash its target price from C$98 to C$88.
According to a group of analysts led by Sam Poser, the demand for products made by Canada Goose has not diminished. The revenue growth for fourth-quarter and guidance for the fiscal year 2020 did not meet expectations, but it was more likely caused by the company’s decision to secure the brand’s regulated growth.
Susquehanna analysts added that the demand is still notably greater than supply, which is a good thing for the company. Moreover, product investment, new stores worldwide, and other business areas will help the company achieve growths in earnings and revenue in the next decades. Analysts also foresee Canada Goose to surpass the company’s initial 2020 fiscal guidance; however, it may not outdo the degree to which 2019 fiscal guidance was surpassed.
For 2019, Canada Goose is aiming for growth in revenue of at least 20% from last year’s C$614 million, and an adjusted 25% EPS growth from 2018’s C$1.01 per share.
According to a group of analysts headed by Simeon Sigel, they are expecting significant sales growth to continue. Siegel added that the substantial margin expansion in the fourth quarter was obscured by lightened sales, with the Canadian holding company missing the Street revenues estimates since the IPO.
Analysts from Instinet believe brand-new stores will produce growth, but in terms of revenue growth, it might be less reliable.
Analysts are hopeful about China and regarded the international markets as “a bright spot.” Moreover, global financial securities service Instinet gave Canada Goose a neutral rate with a price target of C$50, which fell from C$63.
Canada Goose shares made an excellent turnout in Thursday trading with 2.7%, but have declined for the year-to-date about 20.4%. The American stock market S&P 500 index has obtained 11.6 % in 2019 so far, outperforming the Dow (Dow Jones Industrial Average), which went up 8% for the term.
