DA Davidson Upgrades Hanesbrands To Buy On Valuation, Long-Term Growth

In a report published Friday, DA Davidson analysts upgraded the rating on

to Buy, while maintaining the price target at $37, following the pullback in the stock after the company announced lackluster 1Q results. The share price fell more than 10 percent before stabilizing, following the in-line 1Q results reported by the company. The analysts believe that this pullback offers an attractive entry point for investors, given that Hanesbrands' long term growth drivers are still intact. The company reported its 1Q revenue and non-GAAP EPS in-line with the consensus, while revising its full year guidance marginally upwards, driven by the recent acquisition of Knights Apparel. The analysts believe that 1Q is usually a seasonally light quarter for the company and the results indicate that Hanesbrands' long-term growth strategy is progressing on track. According to the DA Davidson report, "In our view, the combination of high brand awareness/loyalty, the Innovate-to-Elevate strategy, and strong retail relationships has and will continue to fuel HBI's leadership position. This already leading market position means robust organic growth is unlikely; however, we see ample potential for a healthy low-single digit organic CAGR." The analysts believe that Hanesbrands has not yet fully realized the pricing power of its leading brands, while additional growth opportunities could be available in the long term through the Activewear and intimate apparel categories, as well as international expansion. "Given HBI's intimate apparel acquisitions and brand consolidation strategy, we believe the company has the potential to transform the shopping experience and promotional cadence of this mature, highly competitive category," the analysts added.