Is It Time To Buy The Dip In L Brands?

L Brands Inc LB was hammered Thursday after the company disappointed investors with its second-quarter earnings report. Not everyone on Wall Street was disappointed by what they saw from the company, however. MKM Partners analyst Nehal Chokshi says investors should be jumping on the opportunity to buy L Brands on the dip.

In a new note on Thursday, Chokshi wrote that L Brands delivered another strong quarter, including solid revenue guidance. However, Chokshi said management’s optimism about the future was the most encouraging sign for investors (see his track record here).

Throughout the earnings call, management repeatedly noted their expectations for accelerating revenue growth throughout the remainder of the fiscal year, a prediction that is particularly impressive given the company’s more difficult near-term comps.

“Management cited the driver of the acceleration is due to differentiated technology in All Flash Arrays, Converged Infrastructure and Hybrid Cloud, with the latter the area we believe NTAP wields the most differentiation, and we believe is still in the very early innings of industry adoption, and thus aligns NTAP with a very powerful multi-year trend similar to how it was aligned with virtualization that drove well above industry growth for NTAP from FY07 to FY12,” Chokshi wrote.

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Other Wall Street analysts were not quite as impressed.

Nomura analyst Simeon Siegel said he will be waiting for further evidence that L Brands’ slumping earnings have reached a positive inflection point.

“As comp pressures likely persist into 2H w/margins following suit, we remain sidelined given VS pressures, potentially nascent concerns at BBW (store comps and margins), and ongoing uncertainty continue to chip away at LB’s perceived premium vs. other mall-based retailers,” Siegel wrote.

MKM Partners maintains a Buy rating and $56 price target for L Brands, while Nomura maintains a Neutral rating.

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