Coach's Recovery Gaining Confidence Among Analysts

Since Coach Inc COH's all-time high in 2012, the stock has fallen 44.17 percent. Some experts, including those at Baird, believe Coach is positioned well to recover.

Baird’s Take

Baird Equity Research Mark Altschwager and Drew North upgraded Coach from neutral to Outperform while raising the price target from $45.00 to $50.00.

Related Link: Coach Names Wendy Kahn As CEO And Brand President Of Stuart Weitzman

Brand Strengthening

Much of Coach’s drop since 2012 had to do with decline in the Coach brand’s appeal; however, according to a new survey, the brand has shown recent signs of strength and a possible turnaround.

“We’ve been warming to shares in recent quarters as the company has exhibited progress on brand transformation plans but have been waiting for evidence of more broad-based sales improvement (or cheaper valuation) before raising our rating,” stated the Baird analysts.

The Baird Consumer Handbag Survey

Based on Baird’s Q3 Consumer Handbag Survey, which Altschwager believed to be a possible “early indicator of strengthening demand in the outlet channel,” was the main catalyst for the upgrade according to the analyst.

Results from the survey are below, indicating where individuals were asked about their handbag purchase intent:

Note the survey was not company specific.

Recovery Imminent

“Supported by public company comments, survey results and Google search trend analysis… category demand is showing signs of bottoming,” stated the Baird analysts.

Additionally, Altschwager and North believe “more-differentiated fashion, enhanced marketing, and elevated store environments can fuel steady-to-slightly improved market share amid a low-growth backdrop.”

Due to Coach’s comparable recovery, the analysts think the stock could “sustain valuation in the high-teens to low-20’s P/E (near current levels).”

Related Link: Increased Share Of Internet Search Traffic Could Mean Better Comp Sales For Coach And Kate Spade

According to TipRanks, Mark Altschwager was one of the better analysts covering Coach, having an average return per recommendation of +6.3 percent. The analyst is ranked 1,180 out of 4,058 analysts.

At time of writing, Coach traded at $43.40, up 2.60 percent Monday.

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