Analyst Explains Why They Downgraded Their Rating on Michael Kors (KORS)

By Ryan Adsit

Michael Kors (KORSResearch Report) received a Hold rating from Oppenheimer analyst Brian Nagel today. The company’s shares closed yesterday at $47.23, close to its 52-week low of $46.40.

Nagel said:

“We are re-launching coverage of Michael Kors (KORS) with an investment rating of Perform (vs. Outperform previously) and removing our price target of $90. Recently, we introduced a new Consumer Growth & eCommerce universe that combines the best of our legacy Hardlines and Softlines lists. To this end, we spent considerable time studying KORS. We come away concerned that, in the nearer term, ongoing challenges with inventory management and replenishment at the company’s namesake brand and softness within fashion watches will weigh on top-line trends and potentially margins, just as management begins what is likely a significant integration of Versace. Longer term, we are optimistic on the potential for synergistic opportunities with the Michael Kors Holding company structure. A depressed valuation is apt to lend support to shares, even if fundamentals continue to falter.”

According to TipRanks.com, Nagel is a 4-star analyst with an average return of 5.2% and a 57.0% success rate. Nagel covers the Services sector, focusing on stocks such as Weight Watchers International, Dick’s Sporting Goods, and Advance Auto Parts.

Michael Kors has an analyst consensus of Moderate Buy, with a price target consensus of $70.07, implying a 48.4% upside from current levels. In a report issued on November 7, Guggenheim also maintained a Hold rating on the stock.

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Based on Michael Kors’ latest earnings release for the quarter ending September 30, the company reported a quarterly net profit of $138 million. In comparison, last year the company had a net profit of $203 million.

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Michael Kors Holdings Ltd. engages in the design and distribution of sportswear, accessories, footwear and apparel of branded women’s apparel and accessories and men’s apparel. The firm operates its business through three segments: Retail, Wholesale and Licensing.