L Brands Is A 'Show Me' Story Now

Shares of L Brands Inc LB dipped lower Thursday in reaction to its earnings report and the stock continues to flirt with its multi-year low of $35.00 per share. But some analysts continue to expect the bullish story to play out in the bottom half of 2017.

Buckingham Research Group's Kelly Halsor maintains a Buy rating on L Brand's stock with a price target lowered from $52 to $43, which still implies the potential for a 22 percent upside. Exiting the earnings report, sentiment for L Brands is at an "all-time low" but there is an opportunity for investors.

L Brands' stock now offers an attractive 7 percent dividend yield,which in part limits any significant downside to the stock, the analyst noted. Meanwhile, fears around comps at the Bath & Body Works concept turning negative are "overblown" and could see a boost from fall fragrance products.

The Victoria's Secret chain should see improvements in traffic trends due to new products and the brand could also benefit from management's discipline around pricing, Halsor added. In addition, recent headwinds surrounding the exit of swimming apparel removes a headwind, which plagued the stock throughout most of the year.

Finally, L Brand's stock is trading at a 13x multiple on the analyst's fiscal 2018 earnings per share estimate which is below the five year average of 15x. But looking forward Halsor expects L Brand's stock to expand back towards its historical average as the company executes on the lowered expectations.

Bottom line, L Brands is in a "show me position" and if successful investors will "give credit to the stock."

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