Rating: Overweight
Target Price (USD): 57.70
Price (28 Sep 2015, USD): 40.55
In the past few years, the company saw an unprecedented high growth rate, where sales grew at ~53% CAGR. Market expectations, however, have remained rather pessimistic about KORS’ future prospects, with this year’s share price down 46% YTD. While the management’s guidance notes that the company is on track to return to double-digit growth over the next few years, uncertainties regarding the extent of growth deceleration in NA market and higher margin pressures are hampering price recovery.
Despite the negative expectations, we believe such a big discount for KORS is yet undeserved. Unlike its peers such as Coach Inc. (NYSE:COH), which is already experiencing substantial negative growth, KORS has already established itself as a trend-setting brand name to achieve at least a MSD growth in the NA market.
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