UPDATE: Citigroup Lowers PT on Coach on Long-Term Factors

In a report published Wednesday, Citigroup analyst Oliver Chen reiterated a Buy rating on Coach COH, but lowered the price target from $65.00 to $62.00.

In the report, Citigroup noted, “Stock weakness has yielded an inexpensive stock at 12.8x vs. sector 16-17x; however, a theoretically cheap stock isn't a good standalone reason & now given the North America comp miss & guidance of -1.7% stock upside may be reliant upon COH as a “show-me” story. We maintain Buy on long-term factors: (1) global growth as int'l revs are about 1/3 of rev. & rose +17% on C/C basis w/ China +35% at 8% mix; (2) you're getting paid to wait given COH's $1bn annually FCF, guidance of $700mm in share repurchases for next year (~4% cap) vs. $400mm LY, and dividends (currently $1.35 per share or 2.5% yield) to growth in-line with net income; (3) while 4Q execution did not have enough distinctiveness we think the brand equity remains good and new product intros, mgmt changes, a renewed focus on North America, and focus on leather/fashion product, and dept stores should help.”

Coach closed on Tuesday at $53.90.