With 'Favorable' Macro Climate, Piper Jaffray Turns Bullish On VF Corp

VF Corp VFC shares have already gained more than 60 percent over the past year, but the macro backdrop gives the stock another leg of growth ahead, according to Piper Jaffray.

The Analyst

Piper Jaffray's Erinn Murphy upgraded VF's stock rating from Neutral to Overweight with a price target boosted from $85 to $91.

The Thesis

An upgrade of apparel and footwear maker VF is likely to receive "some investor pushback," but a handful of positive factors support incremental upside in the stock, Murphy said in the Monday upgrade note. (See the analyst's track record here.) 

The macro environment, including tax reform and a favorable consumer spending environment, remains supportive for VF's outlook, Murphy said. 

VF's acquisition of Williamson-Dickie adds to VF's workwear brand at an opportune time, the analyst said. The work wear segment will likely ramp quicker than management's original guidance of a 4-percent long-term sales compounded annual growth rate, she said. By 2021, the business could contribute an extra 34 cents per share to VF's EPS, Murphy said. 

VF's older brands like Vans are executing well after a reset in Europe, the analyst said. The brand is likely to be worth less than $4 billion, which implies there is room for "significant" upside compared to peers like Puma, valued at $7 billion, according to Piper Jaffray. 

VF should be viewed as a company that boasts not only strong underlying growth in its outdoor and action sports coalition, with upside potential over time from the Williamson-Dickie's acquisition — which may not be factored into expectations, Murphy said. 

Price Action

Shares of VF were trading higher by 1.6 percent Monday morning at $81.19, which is within striking distance of the stock's all-time high of $82.95.

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