UPDATE: Nomura Initiates Coverage on Abercrombie & Fitch on Attractive Current Levels

In a report published Monday, Nomura analyst Simeon Siegel initiated coverage on

with a Long-Term Buy rating and $43.00 price target. In the report, Nomura noted, “We believe ongoing top-line deceleration has been priced in (shares are -25% YTD vs. +3% for our coverage group) and expense initiatives coupled with a healthy cash balance make ANF attractive at current levels as a longer-term investment. With minimal visibility on trends, we lack conviction in a near-term comp recovery and believe Street estimates beyond 3Q may still prove too high. However, we believe that cheap valuation (11.6x PE, 4x EBITDA, and 9.6% FCF yield for FY14), $0.80-0.85 of expense-driven EPS support and $0.20+ benefit from share repurchases make ANF attractive at current levels for investors willing to wait. We estimate FY13/FY14 EPS of $1.90/$3.10 vs. Street at $2.10/$3.12. Our target price of $43 is based on 14x our FY14 estimate, versus the peer group average multiple of 14x and the company's historical average of 14.8x.” Abercrombie & Fitch Co. closed on Friday at $36.45.