Share Pullback, Low Expectations And Long-Term Potential All Positives For G-III Apparel

Analysts Rick Patel and Cait Howard initiated the stock with an Outperform rating and a target price of $34 implying about 15 percent upside potentials citing long-term prospects and the current lower expectations.

The brokerage expects sizeable EPS power on sales growth in the next five-year period driven by recently unveiled products and categories supported by Donna Karan acquisition. The firm expects G-III Apparel to gain share from current lines. While the company is targeting $5 billion sales as a long-term goal, the lead analyst estimates $3.7 billion implying an EPS power of $5.25. This is more than double from the adjusted EPS of $2.44 achieved in 2015.

Related Link: Here's All Of CLSA's Ratings On Specialty Retail

The EPS could lead to a price of $52 on the stock based on conservative multiple of 10x. "We expect a weak 3Q16 (when sell-in mostly occurs) and a better 4Q16 (when replenishments mostly occur), which is congruent with guidance," CLSA said in a research note.

The lead analyst does not expect weather contributing in any manner to G-III Apparel's upside potentials. The brokerage sees weak traffic in the second half of the current year in the retail concepts though the company offered positive outlook. CLSA expects margin improvement through the exit of unprofitable doors pointing out 100 leases due in the next two-year period.

At time of publication, G-III was up 1.29 percent on the day at $29.04.

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