Abercrombie Being Sold, And Rightly So! (ANF)

Most sell-side analysts are grossly optimistic in their assumptions about future growth and the price targets they assign to individual stocks. This is often becauase they have to "follow the crowd" and upgrade when everyone else upgrades, and because they cannot risk their careers by making outlandish calls. Today, Brean Murray downgraded Abercrombie & Fitch

to Sell from Hold and set their price target at $36. Finally, a return to rational analysis! They note that shares of the teen retailer are up over 18% since the company released September same-store sales of +13%. However, they believe this reflects an almost myopic investor focus on top-line expansion at the expense of gross margins. Brean Murray believes there is no end in sight to the company's price cuts as evidenced by consistent double-digit declines at both Hollister and Abercrombie in October pricing survey. Also, they note inventories remain high and sourcing is now shifting from an asset to a liability. Shares of Abercrombie are lower by $1.88, or 4.12%, to $43.72 today. With the stock trading at just under 17x next year's earnings estimates (which may come down if margins continue to erode), Abercrombie is one name to put on the sell block.