DSW Outgrows Hold Rating, Deutsche Upgrades To Buy

“If the Shoe Fits, Upgrade to Buy,” Deutsche Bank analyst Paul Trussell said as he set a $21 price target on DSW Inc. DSW.

“We believe the YTD decline is overdone, creating an intriguing non-apparel value play. We see modest upside to estimates as initiatives gain traction later this year, but more importantly, there is opportunity for the multiple to recover to the 1-year average as we move past recent merchandising and weather issues,” Trussell said. “DSW has a multi-faceted digital strategy positioning it well in the long run in an evolving backdrop, with incremental share up for grabs over time as others close doors.”

Investors Should Expect A Strong Q2 Earnings Report

Trussell believes DSW should hit the high-end of Q2 EPS guidance driven by several factors. Specifically, he cited: “1) exiting 1Q with good momentum; 2) outperformance in sandals; 3) industry data showing sequential acceleration; 4) the digital relaunch; and 5) an improving inventory position.”

Trussell Sees Upside To His Estimates

He noted that DSW’s valuation looks cheap for a non-apparel value play, and noted how the company has a number of catalyst ahead that should help them beat estimates.

4 Catalysts To Watch Out For

1. Strong boot sales driven by favorable weather
2. Kids rollout improving productivity
3. Power Stores
4. Key Hires

Shares of DSW were up 1.8 at $16.77 percent during Tuesday's pre-market, and at 10 a.m. ET, shares were up 4.07 percent at $17.15.