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Apparel maker Hanesbrands Inc. (NYSE:HBI) reported its second-quarter results Wednesday, which prompted Barclays to downgrade the stock from a bullish stance.
The Analyst
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Barclays' Chethan Mallela downgraded Hanesbrands from Overweight to Equal Weight with a price target lowered from $22 to $19.
The Thesis
Exiting Hanesbrands' report, a near-term improvement in sentiment is "less likely" for multiple reasons, Mallela said in a note.
The company's Champion brand in January 2020 will terminate a longtime deal with retail giant Target Corporation (NYSE:TGT) and this could prove to be a "lasting concern" into fiscal 2019 and fiscal 2020 through a potential wind-down ahead of the termination date.
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Over the near-term, Mallela said Hanesbrands needs to show a significant organic sales and margin inflection to achieve its full year 2018 outlook. The problem for Hanesbrand is the company's second-quarter report was merely in-line with expectations versus expectations for a beat which creates a "near-term overhang."
Hanesbrands' stock valuation remains "undemanding" even after the initial 19-percent sell-off, the analyst said. The stock was trading at 9.7 times Barclays' 2019 earnings per share estimate, which represents a 34 percent discount versus its peers but a lack of positive catalysts should prevent investors from buying the dip. On the other hand, the steep valuation discount versus its peers also implies a limited potential downside from current levels.
Price Action
Shares of Hanesbrands were trading higher by 1.7 percent Thursday at $18.27.
Related Links:
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Hanesbrands Loses A Longtime Bull
Crypto Whales Are Loading Up — Are You?
New research shows the biggest crypto buyers are back. And this time? They could hold for the possibility that Bitcoin will surpass $100,000 in 2024. You don’t want to miss the next massive crypto bull run like we saw in 2020 and 2021. To know exactly what’s going on and what to buy… Get Access To Benzinga’s Best Crypto Research and Investments For Only $1.