Brean Says Investors Should 'Take Advantage Of The Pullback' In HSN's Stock

• Shares of HSN, Inc. HSNI have fallen more than 20 percent since its Q2 earnings were released in August.
• Tom Forte of Brean Capital maintained a Buy rating and $81 price target in a note on Friday.
• Forte stated the "pressure put on shares" is "overdone" and investors should "take advantage of the pullback" in shares.

In a report published Friday, Forte pointed out that shares of HSN have sold off due to concerns over a tough comparison in the back half of 2015 along with industry-wide worries of "cord cutting." However, the analyst noted that when considering his full-year expectations of 7 percent sales growth and 11 percent adjusted EBITDA growth (in-line with management's own guidance), the "pressure on the stock" may be unwarranted.

Forte said the company's "amazing success" in the fourth quarter 2014 (sales rose 14.2 percent) and the first quarter 2015 (10.3 percent sales gain) has naturally created tough comparisons moving forward, but this may have been "more than reflected" in the "surprising" 10.7 percent pullback after the company's Q2 print.

"When considering HSN's historical business model has been built on paying for carriage, we expect the company would maintain distribution in an over-the-top media environment and also believe the pressure put on the shares is overdone," Forte wrote. "Therefore, we recommend investors take advantage of the pullback and purchase shares."

Bottom line, Forte expects the company will achieve management's sales and EBITDA growth guidance on a full-year basis and shares will "rebound sharply." In addition, the company's "successful direct response offering" with Keith Urban has provided the company with a new opportunity to leverage its relationships and convert compelling content into retail sales.

Shares remain Buy rated with an unchanged $81 price target.