Imperial Capital Initiates Coverage on Cabela's

Imperial Capital initiated coverage on Cabela’s Inc. CAB Wednesday with an Outperform rating and $62 price target.

Analyst John O’Neil commented that Cabela's is a leading retailer of hunting, fishing, and outdoor products, with a current store base of 64 units and significant expansion potential in a fragmented market.”

The analyst report observed that “The company also has a growing financial subsidiary which issues credit cards that generates about 15-20 percent of CAB's reported profits.

O’Neil noted that “Retail sales have slowed and comps have declined in 2014 as the company compares against last year's "surge" in gun and ammunition sales, which occurred following the shootings at the Sandy Hook, CT Elementary School in December 2012.

“We believe camp store sales levels will normalize in 2015, and with square footage growth of 15-17 percent , CAB should deliver double-dig it earnings growth and also benefit from a return to its historical multiple.”

O’Neil claimed that “In a world where brick and mortar retailers are vulnerable to disintermediation from online competition, not only does CAB have a leading online presence, but it also has a competitive moat around this business because guns cannot be purchased over the internet.”

Looking ahead, “Over the next few years, CAB plans to open about 14 stores per year, representing 18-21 percent unit growth annually. Since the new store format is smaller than the existing base, the increase in square footage terms will be about 15-17 percent next year,” according to O’Neil.

Cabela’s Inc. recently traded at $52.34, down 0.63 percent.