After a tough start to 2017 for Michael Kors Holdings Ltd (NYSE:KORS) and the rest of the U.S. retail sector, retail stocks have been on the comeback trail in recent weeks. But even with Michael Kors shares up more than 33 percent in the past three months, Oppenheimer analyst Anna Andreeva said Tuesday there is still plenty of upside for Kors.

According to Andreeva, Kors shares have been weighed down over the past couple of years by disappearing profits. However, now that average unit retail has hit a positive inflection point, she believes Michael Kors margins have bottomed. At the same time, market sentiment is extremely low, suggesting it could be relatively easy for the company to surprise to the upside (see Andreeva's track record here).

Part of the winning recipe for Michael Kors has been dialing back its promotional days by 56 percent while launching new higher-end, higher-margin handbags, such as the $398 Mercer and the $400 Sadie. Andreeva says the company’s struggling Friends & Family segment should benefit from lapping its poor fiscal 2017 performance. Despite a 19 percent decline in the most recent quarter, Andreeva said she expects declines to moderate to the 8 to 10 percent range for the rest of the fiscal year.