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Analyst Sees Private Deal as Only Saving Grace for Aeropostale

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In a report published Monday, Belus Capital Advisors CEO and Chief Equities Strategist Brian Sozzi reiterated a Sell on Aeropostale (NYSE: ARO) as shares plunge.

Shares of Aeropostale have fallen approximately 9% in the past five days. Although some investors may see this as a buying opportunity, Sozzi reminds investors of specific concerns surrounding the retailer. The strategist noted merchandising mistakes including its "discounting vortex" trap and the lack of visibility this presents. Belus Capital remarked that discounting usually sparks some demand. Unfortunately, this is not happening for Aeropostale.

Sozzi reported that the Street expects the company to announce worse than expected holiday quarter. The strategist emphasized that this "outcome, as well as the outlook for continued net losses, in our opinion, will cause Aeropostale to tap its previously unused credit revolver in 2014 or seek outside funding."

Belus Capital Advisors concluded that to be a buyer of Aeropostale, an investor would "harness strong, strong belief that the company will announce a going private transaction in mid-March at a multiple in line to recent specially apparel transactions." Sozzi reported that the operating environment is too volatile and has concern that the company can not reduce its cost base quick enough. The strategist suggests to investors to wait and pounce on a more opportunistic offer.

Shares of Aeropostale closed at $7.26 on Friday and have traded as low as $6.90 on Monday, down 5.217%.

Latest Ratings for ARO

DateFirmActionFromTo
Aug 2015Initiates Coverage onPeer Perform
Jul 2015DowngradesNeutralSell
May 2015MaintainsMarket Perform

View More Analyst Ratings for ARO
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Posted-In: Belus Capital Advisors Brian SozziAnalyst Color News Reiteration Analyst Ratings

 

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