At Home Group's Risk/Reward Is Balanced, Says Morgan Stanley

Morgan Stanley’s Simeon Gutman believes At Home Group Inc HOME offers “an intriguing combination of growth and value, with unmatched 20 percent square footage and potential for 25 percent annual EPS growth.”

Gutman initiated coverage at an Equal-Weight rating and price target of $17.

Value Proposition

The analyst mentioned that the company offers a “unique blend” of value-focused retail and physical growth with a balanced risk/reward and upside potential of 55 percent.

At Home currently trades at a 3–4x discount to high growth retailers, which the analyst believes is warranted given that the business was recently taken public and is still high leveraged and immature.

Gutman believes the company has the potential to deliver top-line growth in the low-20s percent and bottom line of 20 percent growth.

Related Link: At Home Group Shares Sell Off Following IPO; Open At $16.25

“A near-term slip could send HOME's multiple to 5x–6x, which is more in line with our covered home furnishing retailers. This balanced upside/downside keeps us on the sidelines. HOME fills a unique niche in the home furnishings segment,” Gutman stated.

Unmatched Concept

The analyst also pointed out that At Home’s merchandising is sharp, and the depth and breadth of its product is unparalleled in brick and mortar retail.

It carries 50,000 SKUs in-store, and Gutman noted such a concept did not exist in the marketplace and “serves a value-seeking consumer, one of the best places to be in retail.”

Full ratings data available on Benzinga Pro.