In a research note out Tuesday, Brean Capital analyst Liz Pierce initiated coverage of Express Inc. EXPR with a Buy rating and $21 price target.
Pierce said, "Over the past couple of years, we believe EXPR's fashion DNA was compromised by some self-inflicted responses to the
competitive environment; however, beginning in Q4, the company began to course correct with a brand-right message consistent with its rich fashion legacy."
While Pierce looks for the competitive environment to remain challenging, she believes Express' curated and well-edited merchandise position combined with its flexible supply chain positions it to defend its turf.
Several reasons for the Buy Rating are noted:
- Brand message back on track
- Several initiatives in place to lift productivity
- Considerable upside growth potential for both online and international
Brean also believes there is no governor to limit operating margin expansion beyond 13 percent. "Accordingly, we are launching coverage with a Buy rating and a $21 target price; our TP is based on a multiple of 16.5x our FY16 EPS of $1.27and PEG ratio of 0.7."
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