Summertime sadness? Perhaps that’s the reason why Canada Goose (GOOS) is feeling the heat.
The outdoor apparel company saw its stock plunge 30% on Wednesday following a worse-than-expected fourth-quarter earnings release, while lowering its outlook on revenue. The company reported total revenue of CAD $156.2 million, slightly lower than the CAD $156.8 million expected though still 25% higher than last year. Canada Goose expects sales growth at 20% over the next three years, which, while impressive for many companies, is far lower than the 40% it has seen over the past few years.
Though the earnings and muted outlook aren’t providing for much support, analysts Kate Fitzsimons of RBC and Mark Petrie of CIBC both are still bullish on the stock. Both analysts reiterate an Outperform rating on GOOS stock, with C$90 and C$95 price targets, respectively.
Fitzsimons acknowledges that Canada Goose “shares have traded sideways since their 3QF19 print,” but believes the stock is still “priced for perfection at 39x FY2 consensus EPS.” Petrie, for his part, calls the earnings release “solid,” and says “one-year and three-year guidance ranges [are] conservative.”
A challenge for Canada Goose is high expectations. The company has beaten consensus estimates for both revenue and EPS each of the past eight quarters, up until now where it finally came in lower. But Fitzsimons says the company’s “2020 and 3-YR outlook for at least 20%+ revenue growth and 25%+ EPS growth points to at least $1.4B in sales and ~$2.50+ in EPS in the next three years,” which, while a declaration, is still higher than the current $831 million and $1.36 EPS in FY19.
Petrie says that “F20 guidance assumes eight new stores,” with only six being announced. The company announced a share buyback program (NCIB), but Petrie expects “activity to be limited, at least until FCF turns favourable in H2.” As the analyst believes Canada Goose’s losses are linked to “substantial investments to support growth including new stores and corporate SG&A,” he is confident about the future as spending decreases, while return on investment is realized.
All in all, when looking at Wall Street’s stance, these analysts are not the only bulls, as TipRanks analytics showcase GOOS stock as a Buy. Out of 7 analysts polled in the last 3 months, 5 rate Buy on the stock, while 2 remain sidelined with a Hold. The 12-month average price target stands at $66 marking an 44% upside from where the stock is currently trading. (See GOOS’ price targets and analyst ratings on TipRanks)