DA Davidson Heats Up On Columbia Sportswear As Temps Drop

Columbia Sportswear Company COLM bagged a sell-side upgrade this week as the retailer enters winter coat season. 

The Analyst 

D.A. Davidson’s Michael Kawamoto upgrades from Neutral to Buy rating and raised the price target from $100 to $105.

The Thesis

Since Columbia's second-quarter report, the stock has declined 4 percent despite reporting two consecutive earnings and sales beats and raising guidance both times, Kawamoto said in the Thursday upgrade note. (See his track record here.) 

The underlying fundamentals for the company are strong, and Columbia’s products and marketing are being well-received by consumers, the analyst said.

While the weather forecast is a wildcard, it's shaping up to be a good winter for Columbia, shifting the company’s risk-reward profile from balanced to favorable, he said. 

“Given 2017 was considered a favorable winter, and weather in 2018 is-in line or better in most regions, we are encouraged by initial trends. Additionally, it sounds like snow sports season is off to a decent start this year compared to a slower start in 2017." 

Columbia has "clean outerwear inventories" as the weather turns, Kawamoto said. 

“Black Friday and retailer commentary has been mostly positive, particularly around outerwear, setting the stage for a good winter/holiday season."

The retailer's direct-to-consumer business, which the analyst said accounted for 40 percent of Q4 sales, stands to benefit from winter weather in the form of same-store sales and e-commerce. 

D.A. Davidson is maintaining its revenue and EPS estimates despite seeing the potential for upside, as half of winter product sell-through occurs in December and January. 

Price Action

Columbia shares were up 1.39 percent at $91.36 at the time of publication Friday. 

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Public domain photo via Wikimedia.