DA Davidson Upgrades 1-800-Flowers As Rival FTD Wilts

1-800-Flowers.Com Inc FLWS is likely to continue gaining market share, with its three main segments delivering healthy growth and its main rival suffering from internal issues, according to D.A. Davidson. 

The Analyst

DA Davidson’s Linda Bolton Weiser upgraded 1-800-Flowers from Neutral to Buy and raised the price target from $18 to $22.50.

The Thesis

The company’s Consumer Floral segment, which contributes around 40 percent of total revenue, is benefiting from the financial woes at rival FTD Companies Inc FTD, Bolton Weiser said in the Tuesday upgrade note. 

FTD delivered a fourth-quarter miss, a disappointing Valentine's Day and is operating under bank-imposed constraints, the analyst said. While its capex has been capped at $22-$28 million for 2019, the company needs at least $35 million to “restore competitiveness,” she said. 

1-800-Flowers’ Consumer Floral business is expected to accelerate its revenue growth from 5 percent in fiscal 2018 to 7 percent in fiscal 2019, Bolton Weiser said. The company increased marketing to gain share in online orders in light of FTD's difficulties, she said. 

The BloomNet wire service business generated 13 percent year-on-year revenue growth in the fourth quarter followed by 21 percent in the first quarter of 2019 and 15 percent in the second, according to D.A. Davidson. 

This segment is also expected to benefit from FTD’s deterioration, the analyst said. 

Gourmet Food, which contributes around 52 percent of total revenue, is “finally firing on all cylinders,” backed by digital spending and long-term investment in mobile, Bolton Weiser said. 

Price Action

Shares of 1-800-Flowers were surging 4.23 percent to $18.72 at the time of publication Tuesday. 

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