MKM Starts Cabela's At Buy, Sees 'Plenty Of Growth' Ahead

In a report published Wednesday, MKM Partners analyst Patrick McKeever initiated coverage of

with a Buy rating and a price target of $59. Cabela's is all set to expand its stores from the current 70 to over 200 and is well positioned to sustain a low-double-digit rate of square footage growth. "This, along with low-single-digit same-store sales increases, modest margin expansion and strong performance from the company's high-quality credit card portfolio, should translate to annual EPS growth in the low- to mid-double-digits," analyst Patrick McKeever mentioned. Concerns related to cannibalization, competition and e-commerce and their impact on the company's performance appear to be "overdone." Although these factors have impacted Cabela's sales and earnings, MKM Partners believes it is "manageable and not significant enough to cloud the LT growth story." Cabela's strengths lie in its online leadership, barriers to entry in the outdoor sports segment and the company's exclusive product range. The company's comps are expected to turn positive in 2H15 due to "an improving firearms dynamic, greater regionalization of the assortment and a constructive consumer backdrop," McKeever wrote. The company is expected to report 2Q15 comps of (0.5 percent) and EPS of $0.62. The adjusted EPS estimates for FY15 and FY16 are $3.15 and $3.66, respectively.