UPDATE: Oppenheimer Initiates Fossil Group at Perform on Valuation
In a report published Thursday, Oppenheimer analyst Anna Andreeva initiated coverage on Fossil Group (NASDAQ: FOSL) with a Perform rating and $98.00 price target.
In the report, Oppenheimer noted, “While we like FOSL's dominant market share characteristics in high-margin watches and accessories categories, we are sidelined on the shares as 2013 guidance for acceleration in organic sales trends could be optimistic, while valuation is at the high end of historical averages, with the stock rallying off the lows recently. After 20%-plus top-line growth on average for the past three years, FOSL's sales growth is decelerating to 10%-11% in 2013 and could normalize further as the company has now lapped its acquisition of Skagen (which drove the top line by 4-5 points for the past four quarters). Moreover, 2013 is shaping up as the third consecutive year of operating margin contraction. Trading at 17x and 15x our 2013 and 2014 EPS estimates, in line with the group and at the high end of historical averages, we believe risk/return is balanced at these levels. Longer term, we believe FOSL can post high-single-digit top-line growth as the company makes acquisitions, buys back its distributors and signs new license deals, although the roll-out of smart watches could be a legitimate concern.”
Fossil Group closed on Wednesday at $106.90.
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