Party Pooper: Standpoint Research Downgrades DSW Inc. Shares
Standpoint Research Moves to Sidelines as DSW Delivers Upbeat Earnings
DSW Inc. (NYSE:DSW) investors are busy throwing a party today, after the apparel retail firm posted its first positive same-store sales number since 2015. The retailer’s Q2 sales increased 3.3% to $680.4 million, beating consensus estimates of $666.1 million. In addition, earnings rose to $0.38 a share (from $0.35 a share last year), compared to consensus estimates of $0.29.
In response, Standpoint Research analyst Ronnie Moas downgraded DSW from Buy to Hold. (To watch Moas’ track record, click here)
Moas explained, “DSW is up 22% for us today. I can no longer leave my highest recommendation attached to this name given the recent absolute and relative move […] The DSW move this morning gets me back to (near) even on DSW. Additionally, exiting DSW allows me to reduce my exposure to the Footwear industry and the Retail/Apparel industry that is getting devastated by Amazon … the rapidly declining shopping mall count and related decline in foot traffic. DSW could push towards $20-$22 on a short squeeze – for the time being I will move to the sidelines on this name. It is now, based on the intraday quote of $19.21, trading at 13X earnings. 15% of the market cap is in cash versus no debt … and the dividend yield is still topping 4%. P/CF is 8X and P/S is 0.6. There is a significant share buyback in place and $2 in EPS potential looking out to 2020. There still appears to be good value here, but in this risky space, what appears to be a value, oftentimes turns out to be value trap.”
Overall, out of the 8 analysts polled in the past 3 months, 3 rate DSW stock a Buy, while 5 rate the stock a Hold. With a return potential of nearly 5%, the stock’s consensus target price stands at $19.50