Global fashion brand Michael Kors Holdings Ltd KORS's recent acquisition of Versace sent the American-based company's stock lower by 9 percent — and investors should buy the dip, according to Citi.
The Analyst
Citi's Paul Lejuez upgraded Michael Kors from Neutral to Buy.
The Thesis
Michael Kors' acquisition of Versace comes at a time of momentum for the company, which will rebrand itself as Capri, Lejuez said in the upgrade note.
Kors has shown a track record of impressive beat-and-raise earnings reports, the analyst said. Ivestors should have confidence in the company's ability to improve Versace's sales productivity and margins, he said.
The Street is not pricing in any upside potential from Versace, which offers investors a positive risk-reward profile at current levels, according to Citi.
Price Action
Kors shares were trading down 1.57 percent at $66.99 at the time of publication Thursday.
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