Wall Street believes that concerns over Michael Kors Holdings Ltd (NYSE:KORS) are unjustified ahead of Wednesday’s earnings report. Analysts at Citigroup, Morgan Stanley, and Piper Jaffray have all recommended that clients purchase shares ahead of the fine print. All of the firms have cited positive channel checks, optimistic retail trends, and an upbeat tone from management.
The New York-based Canaccord Genuity also initiated coverage on May 20 with a “buy” rating and $82 price target, the highest on Wall Street.
Tiffany
Tuesday, May 28 before market open; EPS $0.52 / Revenue $855.2 million
The iconic Tiffany & Co. (NYSE:TIF) brand with its flagship Fifth Avenue, NYC retail location, holds international acclaim for its high-end jewelry. Shares meandered throughout 2012 as the company struggled with record-high input costs for precious metals but have risen more than 36% year-to-date through May 21.
While gold and silver prices have fallen a long way from 2011 highs, readers should understand that Tiffany likely entered into price hedging contracts, which locked in high input costs on precious metals. Odds are that management is making good use of current market conditions to lock in gold and silver at multi-year lows.
Wall Street has mixed sentiment on Tiffany & Co. (NYSE:TIF) ahead of Tuesday’s report. Analysts at Wells Fargo downgraded the stock to “market perform” from “outperform” based on valuation and seasonality. Earnings for luxury goods makers are weighted toward the back-half of the year, and the holiday fourth quarter can represent as much as 40% of annual revenue.
Aside from Wells Fargo, analysts at Citigroup have spoken positively on Tiffany following a April 10 meeting with corporate in New York City. Following its meeting with CEO Michael Kowalski and CFO Patrick McGuiness, Citigroup raised its price target to $84 from a previous $68 and recommends the purchase of shares ahead of Q1 2013 results.
Oppenheimer & Co. is also positive on Tiffany & Co. (NYSE:TIF) and raised its price target to $85 based on lower silver prices.
| Coach | Michael Kors | Tiffany | |
|---|---|---|---|
| Market Cap ($) | 16.7 B | 12.3 B | 10.0B |
| Ann. Dividend/Yield | $1.35/2.27% | — | $1.36/1.75% |
| EPS | 3.70 | 1.70 | 3.25 |
| EPS Growth | 10.6% | 229.4% | -4.5% |
| Revenue Growth | 7.9% | 69.0% | 4.1% |
| Price/Earnings | 16.1x | 35.7x | 24.0x |
| Price/Sales | 3.3x | 6.3x | 2.63x |
| PEG Ratio | 1.36x | 1.2x | 2.06x |
| Beta | 1.6 | — | 1.8 |
Foolish takeaway
Shares of Coach, Inc. (NYSE:COH), Michael Kors, and Tiffany are excellent plays on the growth of the luxury consumer worldwide. While many companies struggle with the permanent effects of the recession, the high-end purchaser is gaining confidence as equity and housing markets stage an impressive recovery.
Furthermore, all three companies offer a “backdoor” method to participating in emerging markets growth, without taking additional risk through the purchase of foreign issuers.Thanks for reading, and consider subscribing to my posts for more Fool ideas on outperforming the market.
The article 3 Hot Luxury Stocks with Considerable Upside originally appeared on Fool.com and is written by John Macris.
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