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Consumer discretionary

Michael Kors Price Target Cut At Piper Jaffray Despite Strong Beat

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Michael Kors Q1 earnings result were quite ahead of consensus but concerns regarding the long term have the stock trading lower than yesterday’s levels

Michael Kors Holdings Ltd (NYSE:KORS) Q1 earnings result were quite ahead of consensus but concerns regarding the long term have the stock trading lower than yesterday’s levels. KORS announced its first quarterly earnings reports for fiscal year 2017. The report was quite comfortable ahead of consensus estimates across the board and has beaten revenue and EPS estimates by quite a margin, however, it did not keep Piper Jaffray analyst, Erinn Murphy from cutting the price target down. Ms. Murphy sees the beat as a positive but remains concerned regarding the long term prospects.

The company’s Q1 earnings print had an EPS of $0.88 which was very comfortably ahead of the consensus. The Street estimate for EPS was $0.74 and was beaten by 14 cents. Revenue, on the other hand was reported at $987.9 million which was very comfortable ahead of the street estimate of $953.04 million.

In her report, analyst Murphy explains that KORS currently trades at a very lucrative price and makes for a great investment opportunity. The company’s balance sheet shows improved discipline and operational improvements along with significant cost cuts in key areas which can be very important in the long run. The capital expenditure has also declined significantly and during the recent meetings the possibility of cutting down discount offers has been of central importance. KORS, however, still has quite a long way to go and it wouldn’t be easy to sustain such dramatic measures over a longer period of time. Macro headwinds are also likely to hinder progress. Given the current situation, the analyst has cut the price target down to $64 from $64 but has maintained her overweight rating.

The analyst opinion for the stock has two Buy, five Outperform and 18 Hold ratings with an average rating of 2.64. The stock now trades at a price of $49.29 after gaining 1.19% in the premarket.

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