Inter Parfums Will Be Weighed Down By Valuation, Lack Of Fundamental Catalysts

Shares of Inter Parfums, Inc. IPAR, which operated fragrance business, are likely to be weighed down by valuation and a lack of fundamental catalysts, according to an analyst at KeyBanc.

The Analyst

KeyBanc analyst Jason Gere on Monday downgraded Inter Parfums from Overweight to Sector Weight.

The Thesis

Inter Parfums' current risk/reward profile is marred by a lack of fundamental catalysts despite strong performances in fiscal year 2016 and 2017, Gere said in a note.

The analyst noted the company positively pre-announced fourth quarter sales recently, helping to gel into his already above-consensus earnings per share estimate of 12 cents per share. That said, all the near-term fundamental catalysts are embedded in the stock.

Although M&A could still remain a potential non-fundamental catalyst on the shares, Gere said even this expectation is partially built into the shares.

"IPAR has traditionally acquired licenses but prefers to acquire a brand, similar to the Rochas deal a few year back; the latter, though, is harder to find these days," Gere said.

The company has the wherewithal to fund an acquisition, although it needs to be selective in acquiring an asset into its rich portfolio, KeyBanc said. The waiting period ahead of the next big acquisition could weigh on the stock, the firm added.

However, the firm believes the company could still see solid organic growth in 2018

Price Action

Inter Parfums shares are up about 27 percent over the past year.

Monday, the stock shed 3.97 percent to $45.90 and was up 1.3 percent by Tuesday afternoon.

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