UPDATE: Nomura Initiates Coverage on Aeropostale on Continued Challenges Ahead
In a report published Monday, Nomura analyst Simeon Siegel initiated coverage on Aeropostale (NYSE: ARO) with a Neutral rating and $7.00 price target.
In the report, Nomura noted, “Aéropostale, Inc. (ARO) has not posted a positive comp since 1Q12, and we believe the company is facing a greater issue than simply a seasonal product miss. We worry that ARO will continue to have a difficult time adapting to evolving fashion trends and believe the company's lower-income customers will continue to push back on the fashion-focused, more expensive offerings. While we expect some margin improvement in FY14, meaningful margin recapture seems unlikely. Additionally, we do not expect positive FCF generation for at least the next several years based on current estimates. We estimate FY13/FY14 EPS of ($0.57) / ($0.35), compared with the Street at ($0.65) / $(0.06). Our target price of $7 is based on 0.2x EV/Sales off of our FY14 sales estimate of $2.2bn.”
Aeropostale closed on Friday at $8.28.
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