Mizuho: Kate Spade's Confusion Creates Buying Opportunity

In a report published Friday, analysts at Mizuho Securities maintained their Buy rating on

. The price target was maintained at $40. The pullback in the stock offers an attractive buying opportunity. "We recommend investors capitalize on the pullback and view reaffirmed FY15 targets as achievable despite confusion regarding comp and margin expectations on planned reductions in flash/surprise sales," the analysts said. The company reported robust Q1 results, with the OpEPS beating the consensus expectations and a more than 80bps rise in gross margins. North American sales grew over 31 percent, despite the reduction in promotions, while International sales grew more than 18 percent. The analysts expressed their optimism regarding the company's decision to enter into new product categories and see it as another step in Kate Spade's evolution into becoming a full lifestyle brand. "In conjunction with earnings, the company announced a distribution agreement with Exclusive Brands International to expand the KSNY presence in 17 Latin America and Caribbean territories incremental to KATE," Mizuho Securities added. The analysts believe that the company has made demonstrable progress so far and is effectively executing various strategies to grow into a $4 billion business over time, not only by introducing new products but also entering into new geographies.