UPDATE: Morgan Stanley Reiterates Underweight Rating, Lowers PT on Coach Following Analyst Day

In a report published Friday, Morgan Stanley analyst Kimberly C. Greenberger reiterated an Underweight rating on

, but lowered the price target from $36.00 to $29.00. In the report, Morgan Stanley noted, “COH's cash burn is primarily driven by 1) Reduced earnings outlook (MS est $531 net income), 2) $400m guided CapEx + FY15 HQ CapEx $190m, 3) $220m investment in HQ JV, 4) ~$380m dividends, 5) ~$120m transformation outlay ($250-$300m transformation expenses of which 40% is a cash charge occurring over the next 18 months). If working capital needs increase the cash burn will intensify. Given outsized FY15 US cash needs and limited US cash (see pg 2), we expect COH adds debt to the balance sheet in order to fund these items and sustain dividends. While leverage could meet these needs near-term, undertaking debt to pay dividends is not a sustainable strategy. In the event the turnaround does not produce the desired results, additional leverage could exacerbate COH's challenges.” Coach closed on Thursday at $35.69.