UPDATE: Nomura Initiates Coverage on Francesca's Holdings on Strong Investment Opportunity
In a report published Monday, Nomura analyst Simeon Siegel initiated coverage on Francesca's Holdings Corp. (NASDAQ: FRAN) with a Buy rating and $23.00 price target.
In the report, Nomura noted, “In our view, the recent sell-off in the shares is overdone, as we believe that top-line pressures will abate in the face of easing compares into 4Q13 and beyond and that the recently announced buyback authorization could add EPS of $0.15 0.20 in FY14. At 26.6% in FY12, FRAN's EBIT margins have been the focus of much attention among both proponents and disbelievers. Although we expect top-line pressures to continue to drive deleveraging in the near term, we see a several-hundred-basis-point opportunity to bring SG&A in line with that of peers as the business scales. We project FY13/FY14 EPS of $1.14/$1.33, compared with the Street at $1.15/$1.39. Our target price of $23 is based on 17x our FY14 estimate, in line with our FY14E growth rate and at a premium to the peer group average of 14x.”
Francesca's Holdings Corp. closed on Friday at $18.05.
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