Analyst: FTD Cos. Shares Are A Buy, 1-800-FLOWERS.COM Shares A Hold

DA Davidson initiated coverage of FTD Companies Inc FTD with a Buy rating and a $22 price target, while 1-800-Flowers.Com Inc FLWS was initiated with a Neutral rating and a $11 price target.

Analyst Linda Bolton Weiser attributed the Buy rating for FTD Companies to several factors, including:

  • Being the leader in the growing floral e-commerce industry, the company has valuable brand equities.
  • Shares trading at a 5 percent price/free cash flow discount to 1-800-Flowers.Com
  • Positive sales expectations for the second quarter, given indications from rivals that FTD Companies upped its Mother's Day spending

Belief that Liberty Interactive QVC Group QVCA would want to sell its nearly 35 percent stake at 8.5-9 times EBITDA, implying $26-$28 using the EBITDA estimate for 2018

DA Davidson indicated that FTD Companies' stock traded down 50 percent from its late-2014 high. The firm also noted the CEO was ousted due to disappointing sales performance and has been replaced by John Walden, CEO of U.K.'s Home Retail Group and past president of Best Buy Co Inc BBY's Internet division.

The firm believes Walden has been given the mandate to invest heavily to spur sales in 2017, given that the company trimmed its 2017 EBITDA margin guidance.

DA Davidson believes shares of 1-800-Flowers.Com appear fairly valued now and attributed the Neutral rating to:

  • The consumer floral segment margin of 12.7 percent estimated for 2017 is inching closer to the cyclical peak of 13.3 percent.
  • Cautious comments from the management concerning margins and growth in 2018, given FTD Companies' plan to spend heavily on marketing
  • Valuation being near the mid-point of the historical range, with the risk/reward only slightly favorable
  • That said, Bolton Weiser said it would like to get more constructive, given the catalysts over the next 12 to 24 months.

Additionally, the analyst expects the company to make an accretive acquisition with the $112 million proceeds from the May 30 sale of Fannie May.

"We could get more constructive with a price pull-back or if FLWS shows good floral results despite FTD's heightened competitiveness," the firm added.

Posted In: DA DavidsonLinda Bolton WeiserAnalyst ColorPrice TargetInitiationAnalyst RatingsTrading Ideas